Top 8 Most Tradable Currency

People utilize currency as a means of payment while making purchases. It's like unique tokens or pieces of paper that represent value. When we want to buy something, we exchange these tokens or paper for the item we want.

In the earliest times, there was a barter system instead of any currency, in which there was no use of paper or any form of money. People used to exchange goods instead of purchasing or utilizing any kind of money. For example, someone may have exchanged item B for item A from another person.

In the modern age, currency is used for almost every essential thing that we want to get, and different types of currency are used all over the world. Therefore, in this article, we will discuss the most tradable forms of currency used around the world.

Here is the list of the top 8 tradable currencies:

1. United States Dollar

The United States dollar (also referred to as the US dollar) was issued by the Federal Reserve. It is the most important and tradable currency in the world and it has the first position in the market for several reasons. The United States is the most powerful country, and its economy is decent.

The U.S. dollar (USD), also known as the "greenback", is the official currency of the United States, which has the largest economy in the world. Like other currencies, the dollar is supported by economic fundamentals, including the GDP, manufacturing, and employment data. However, the central bank and any statements regarding interest rate policy also significantly impact the U.S. dollar. The U.S. dollar is a benchmark against other significant currencies, particularly the euro, the Japanese yen, and the British pound.

It is also a mostly used currency form in international trade. At the same time, the value of the United States dollar depends on the economic performance, and the other country's dependency on the US dollar also influences it.

The Federal Open Market Committee (FOMC), a branch of the system led by a chair and board of governors, receives the majority of attention. It was the world's number-one traded currency for several reasons. It is also one of the most traded currencies around the world.

Its popularity can be attributed to several factors. Notably, the US is an essential contributor to trade and has the largest economy in the entire world. The main factors affecting the value of the dollar are the economic growth of the United States and commodities.

2. Euro

The European Central Bank (ECB), headquartered in Frankfurt, Germany, serves as the central bank for the 17 eurozone members. Similar to the FOMC of the US, the ECB's Executive Council, which consists of five members and is presided over by a president, is the principal body in charge of deciding on monetary policy.

The remaining seats are designated for the system's four largest economies: Germany, France, Italy, and Spain. This is to guarantee that the major economies are always represented in the event of a change in administration. The council convenes approximately ten times a year.

The ECB has the authority to set monetary policy and issue banknotes as it sees proper. Policymakers have the same intervention power as the Federal Reserve during system or bank failure situations. The ECB critically varies from the Fed: the ECB prioritizes price stability above broad economic policies, with secondary commitments to maximizing employment and maintaining stable long-term interest rates.

The euro, the second most traded currency in the world with an average daily volume of nearly US$1.1 trillion, is the European Union's (EU) official currency that the ECB (European Central Bank) issues.

The value of the euro currency also depends on many circumstances. Like the US Dollar, the euro is also so much influenced by the political and economic growth of the country. Some other factors are ECB meetings, GDP, employee data, etc.

The size and power of the Eurozone, where it is utilized, are primarily responsible for the currency's popularity. This presently consists of 20 out of 27 EU member countries. However, the Maastricht Treaty demands that the remaining union members except the UK and Denmark have to allow the single currency system by the specific deadline. Euro is also the second-largest reserve currency in the world, accounting for almost 20% of total reserves in terms of volume.

Events that may have an impact on the euro include events in our economic calendar, such as the announcement of the ECB meeting, the publication of GDP data, the release of employment figures, and national and EU-wide elections.

The euro has made it more convenient to travel and do business within the eurozone. It eliminates the requirement for currency exchange when traveling across eurozones's borders, making transactions more straightforward. The Euro's stability and wide acceptance make it a reliable international trade and investment currency.

3. Japanese Yen

The Japanese Yen is also one of the tradable currencies across the world, and it is ranked third among all the currencies and it is also the third most significant currency. The estimated data was that the currency 'yen' makes up more than 4.9% of the global currency reserves.

The Japanese yen, which has an average daily volume of $554 billion, is the world's third most traded and Japan's national currency. In terms of the percentage of the world's total currency reserves, it is used by the nation's central bank, BOJ, known as the Bank of Japan.

The value of the Japanese currency also depends on many factors. Its value is highly dependable on the growth and strength of the Japanese economy.

China is a significant competitor in the manufacturing sector. Thus, the strength of the Chinese currency 'yuan' can also have an impact. If the 'renminbi' demand weakens for Japanese goods and the 'yen' strengthens, China's exports may become more competitive abroad. Additionally, it is crucial to remember that the oil price can significantly influence the yen's value. This is because Japan imports a lot of oil, and high costs might hurt its economy.

The current condition of Japan's economy, particularly its industrial sector, which manufactures significant exports, including automobiles, electronics, machine tools, ships, and textiles, significantly impacts the yen's value. Many forex traders focus on economic announcements since the yen's value frequently rises in tandem with the level of demand for these goods. These can include information about the BOJ (Bank of Japan) meeting and GDP figures.

4. Pound Sterling

The history of the Pound Sterling goes back over a thousand years. The Pound originated from the British pound weight, a unit used to measure silver. It became the official currency of England in the 12th century and later expanded to cover the whole of the United Kingdom.

The United Kingdom has a strong economy and plays a major role in the exchanges of international trades and significant finances. The Pound's value changes can impact trade investments and the country's economy.

The decision by the United Kingdom to leave the European Union, sometimes known as Brexit, has had a substantial recent impact on the value of the pound sterling as well. The process of Brexit has had implications for the currency, causing fluctuations in its value as markets react to the uncertainties surrounding the UK's future relationship with the EU.

So, the performance of the UK economy has a significant impact on the pound's value; data on inflation rates, the Bank of England's (BoE) monetary policies, GDP, and employment figures may all have an impact. The United Kingdom has maintained a good relationship with Europe in the past years, making it worth it. The nature of the country's ultimate relationship with the EU, especially its future trade relationship, is expected to influence the pound in the coming years.

5. Australian Dollar

The Australian Dollar was introduced in 1966, replacing the Australian Pound. The decision to adopt a decimal currency system was made to simplify transactions and align with the international trend of decimal-based currencies.

The Australian dollar has an average daily volume of US$223 billion. The Australian Dollar is a primary currency used to exchange trade and goods. Australia has a stable economy and is rich in natural resources. Changes in the value of the Australian Dollar can impact international trade, investments, and tourism.

The Australian Dollar is often referred to as a commodity currency due to Australia's significant exports of natural resources. Fluctuations in commodity prices, especially for commodities like iron ore, can impact the Australian Dollar's value.

Changes in various commodities' trade volumes and prices may influence the Australian dollar (AUD). Australia is a significant exporter of coal, iron, and copper, among other mined commodities, as well as a big importer of oil. A stronger Australian Dollar can make imported goods cheaper for Australian consumers but may make Australian exports more expensive.

The value of the Australian Dollar can influence tourism and travel. A weaker Australian Dollar can make Australia a more attractive destination for international tourists, making travel and accommodation relatively cheaper.

The country's foreign debt size also impacts the currency's value; if this factor increases, the Australian dollar is likely to lose value relative to the currencies of its main trading partners.

6. Canadian Dollar

The official currency of Canada is the Canadian dollar, which refers to the sixth-most traded currency in the world, with an average daily volume of US$166 billion. With 2.02% of the total amount of reserves held worldwide, the currency is the fifth most popular reserve currency.

Like Australia, Canada is blessed with natural resources and is a significant exporter of goods. Therefore, these goods' pricing also significantly impacts the Canadian dollar (CAD). The currency's value is expected to grow as commodity prices rise and drop when they decline.

7. Swiss Franc (CHF)

In 1850, the Swiss Federal Constitution established the Swiss Franc as the official currency of Switzerland. The Franc has remained stable and has gained a reputation for being a safe-haven currency.

The Swiss Franc, the country's official currency, is traded for an average daily volume of US$164 billion, placing it seventh among all other currencies and tenth among reserve currencies. The Swiss National Bank, or SNS, the nation's central bank, issues it.

It is often sought after during global economic uncertainty or financial crises. The Franc's value can impact international trade, investments, and Switzerland's economy.

It is also denoted as the haven currency. The Swiss Franc has gained a reputation as a "safe-haven" currency due to the nation's reputation, generally sound monetary policies, and low debt levels due to Switzerland's strong economy, political stability, and sound financial system. Investors tend to buy Swiss Francs during global instability to preserve their wealth.

The value of the Franc is also strongly influenced by the strength of the euro and the performance of the economies of other developed countries, particularly the Eurozone countries that buy most of Switzerland's exports.

8. Chinese Renminbi (CNH)

The Renminbi has a history dating back to ancient China, but its modern form was established in 1949. After founding the People's Republic of China, the government introduced the Renminbi as the official currency to replace the old currency system.

The Chinese Renminbi is gaining importance in the global currency market. The country has also gained a second position in the largest economy. The value of the Renminbi can impact global financial markets and have implications for international trade and investments.

The Chinese government manages the Renminbi's exchange rate through its central bank, the People's Bank of China. They use a managed floating exchange rate system whose primary purpose is to exercise some control over the currency value. Various factors, including economic indicators and government policies, influence the exchange rate.

The value of the Renminbi can impact individuals and businesses within China and abroad. A stronger Renminbi can make imported goods cheaper for Chinese consumers but may make Chinese exports more expensive. The Chinese government has faced criticism from some countries for allegedly manipulating the value of the Renminbi to gain trade advantages.

Overall, the Chinese Renminbi's history, China's economic prominence, and government policies influence its impact on the currency market. The value of the Renminbi affects trade, investments, and the purchasing power of individuals and businesses, both within China and internationally.