How Currencies Are Ranked in Forex
Forex is the most liquid market of all, capable of moving an extraordinary amount of money every day. However, in the Forex trading market, not all currencies are equal. They are divided by importance, that is, by their ability to move investments. Here are the most traded currencies. These rankings feed directly into the most popular forex currency pairs.
The Dollar and the Euro
US Dollar. You don't need a Forex expert to understand it: the dollar is the most important currency in the world and acts as a "universal currency". It is also the main safe-haven currency in case of global economic turmoil. The reason for the dollar's hegemony is economic (the US is the largest economy in the world) but also political.
Euro. It is the second most important currency as it groups some of the main world economies. Almost on par with the dollar, it is considered a safe-haven currency. This is due to its stability, resulting from the prudent policy of the ECB, famous for its low interventionism. For more trivia along these lines, see 10 surprising facts about the euro.
The Yen, the Pound, and the Franc
Yen. It is the currency of Japan. It is not very liquid, or at least not as much as the euro and the dollar, but it is still important as the Japanese economy is the second largest in the world. It is widely traded as it is moderately volatile. It is strongly linked to the fortunes of the Nikkei index.
British Pound. The United Kingdom, and London in particular, is one of the most important financial centers. The British pound is therefore one of the most traded. It is not considered a safe-haven currency but rather a speculative currency, given the interventionism of the Bank of England.
Swiss Franc. It is the most important currency "among the least important ones". Investors often rely on the franc because of its stability, although recently it has been compromised by the decision of the Swiss central bank to remove some constraints in the relationship with the euro.
Currencies Tied to the US Dollar
Canadian Dollar and Australian Dollar. These currencies can be considered as a whole, since their fortunes often coincide. They are dependent on the US dollar as their respective central banks try to move within the parameters offered by the Fed. In a nutshell, they replicate its monetary policy decisions.
Exotic Currencies
Other less traded currencies, and therefore defined as exotic, are: the Turkish lira, the Mexican peso, the Swedish krona, the Norwegian krone, the Danish krone, the Russian ruble, the Indian rupee, the Brazilian real, and the Chinese yuan.
