Forex, short for foreign exchange, is the largest and most liquid financial market in the world. It is where currencies are traded against one another, with an average daily turnover of over $5 trillion. Forex trading provides opportunities for traders to profit from the fluctuations in currency values. But which currencies trade on forex?
The answer is simple: almost all major and minor currencies trade on forex. However, some currencies are traded more frequently and have higher liquidity than others. The most traded currencies in the forex market are known as the major currencies. These currencies are the US dollar (USD), the euro (EUR), the Japanese yen (JPY), the British pound (GBP), the Swiss franc (CHF), the Canadian dollar (CAD), the Australian dollar (AUD), and the New Zealand dollar (NZD).
The US dollar is the most actively traded currency in the forex market, accounting for about 88% of all forex trades. It is the world’s reserve currency and is used to settle international transactions. The euro is the second most traded currency, accounting for about 31% of all forex trades. The eurozone is the second-largest economy in the world, and the euro is the second most important reserve currency after the US dollar.
The Japanese yen is the third most traded currency, accounting for about 22% of all forex trades. Japan is a major exporter, and the yen is often used as a funding currency for carry trades, where investors borrow in low-yielding currencies to invest in higher-yielding assets. The British pound is the fourth most traded currency, accounting for about 13% of all forex trades. The UK is one of the world’s largest financial centers, and the pound is used as a reserve currency by many central banks.
The Swiss franc is the fifth most traded currency, accounting for about 5% of all forex trades. Switzerland is known for its stability and neutrality, and the Swiss franc is often used as a safe haven currency in times of uncertainty. The Canadian dollar is the sixth most traded currency, accounting for about 4% of all forex trades. Canada is a major exporter of commodities, and the Canadian dollar is often influenced by the price of crude oil.
The Australian dollar is the seventh most traded currency, accounting for about 3% of all forex trades. Australia is a major exporter of natural resources, and the Australian dollar is often influenced by commodity prices. The New Zealand dollar is the eighth most traded currency, accounting for about 2% of all forex trades. New Zealand is a small economy, but the New Zealand dollar is often used as a proxy for the Australian dollar.
Apart from the major currencies, there are also minor currencies that trade on forex. These currencies are often referred to as exotic currencies and are less liquid than the major currencies. Some examples of minor currencies include the Mexican peso (MXN), the Russian ruble (RUB), the Chinese yuan (CNY), the South African rand (ZAR), and the Brazilian real (BRL).
Exotic currencies are often subject to higher volatility and wider spreads, making them riskier to trade than major currencies. However, they can also present opportunities for traders who are willing to take on higher risk. Some traders specialize in trading exotic currencies, taking advantage of their unique characteristics and market dynamics.
In conclusion, almost all major and minor currencies trade on forex. The most actively traded currencies are the US dollar, the euro, the Japanese yen, the British pound, the Swiss franc, the Canadian dollar, the Australian dollar, and the New Zealand dollar. These currencies are widely used in international trade and finance, and their exchange rates can be influenced by a wide range of economic and geopolitical factors. Exotic currencies, although less liquid and riskier to trade, can also present opportunities for traders who are willing to take on higher risk.