There are nearly 200 active currencies in the world. But much of the foreign trade and other forex activities are done only with a small number of currencies. According to the Bank of International Settlements, a staggering $6.6 trillion worth of currencies trade daily on the foreign exchange market. Here we take a look at the ten most traded currencies in the world. The ranking is based on data from the Bank of International Settlements.
Every forex trade involves two currencies, or a currency pair. The most popular currency pairs in the world are the USD/EUR, USD/JPY, and USD/GBP. Each currency trade is counted twice, once under the bought currency and again under the sold currency. That’s why the total sum of all trades is represented as 200%. If a currency accounts for 10% of global forex trades, it means the currency was on either side of the exchange in 10% of all forex trades.
Most traded currencies
10- New Zealand Dollar (NZD)
The New Zealand dollar has held its 10th spot for a decade. According to the Bank of International Settlements (BIS), New Zealand’s currency is involved in 2.1% of forex trades. It’s not a major reserve currency. New Zealand’s biggest trading partners are China and Australia. So, the strength of its currency is influenced by the economies of its largest trading partners.
Jim O’Shaughnessy: Fear Signals Created By The Reptilian Brain
ValueWalk's Raul Panganiban interviews Jim O’Shaughnessy, Chairman, Co-chief Investment Officer, and Portfolio Manager at O’Shaughnessy Asset Management. In this part, Jim discusses the fear and emotional signals created by the reptilian brain. Q1 2020 hedge fund letters, conferences and more That's very cool. For the factor to try to seek the reason why it works, Read More
9- Hong Kong Dollar (HKD)
Issued by the Hong Kong Monetary Authority (HKMA), the Hong Kong dollar accounts for 3.5% of global forex trades. Its average daily trading volume is around US$117 billion. The HKD is used in Hong Kong as well as Macau. The economy of Hong Kong has been going through tough times in recent years due to the massive pro-democracy protests.
8- Chinese Yuan (CNY)
The Chinese renminbi aka yuan is issued by the People’s Bank of China. Thanks to China’s rapidly growing economy and exports, the yuan has become one of the most traded currencies in the world. It’s still an emerging market currency, but its share has grown from 4% in 2016 to 4.3% in 2019. The currency’s exchange rate is still tightly controlled by the PBOC, though China would want the world to believe otherwise.
7- Swiss Franc (CHF)
The Swiss franc is the legal tender of Switzerland and Liechtenstein. Issued by the Swiss National Bank, its average daily trading volume is around $165 billion. The Swiss franc accounts for 5% of global forex trades. It is often considered a safe haven currency. Nearly half of Switzerland’s foreign trade takes place with members of the European Union.
6- Canadian Dollar (CAD)
The Canadian dollar is the world’s sixth most traded currency with an average daily trading volume of about $166 billion. Canada is a leading producer and exporter of commodities. The United States is Canada’s largest trading partner. The US accounts for 75% of Canada’s exports and roughly 50% of its total imports.
5- Australian Dollar (AUD)
With 6.8% of global forex trading share, the Australian dollar is the fifth most traded currency. It was introduced in 1966 to replace the Australian pound. It is issued by the Reserve Bank of Australia. Just like Canada, Australia is a leading exporter of commodity goods. So, the trading volumes and prices of commodities influence the strength of the Australian dollar.
4- Pound sterling (GBP)
There was a time when the British pound was the second most traded currency on the planet. But the growth of Yen and Euro, and the shrinking British Empire have pushed it down to the fourth spot. With an average daily trading volume of $422 billion, it still accounts for 12.8% of global forex trades. The pound sterling is also a leading reserve currency.
3- Japanese Yen (JPY)
The Japanese yen’s share has declined from 21.6% in 2016 to 16.8% of global forex trades in 2019. But it has retained its third spot. The decline in the yen’s trading volume has largely been attributed to the contraction in USD/JPY trades amid low volatility. The yen’s average daily trading volume is around $554 billion. Japan is one of the world’s leading exporters of manufactured goods.
2- Euro (EUR)
Introduced in 1999, euro is the official currency of 19 of the European Union’s 27 member states. It is issued by Frankfurt-based European Central Bank. The euro accounts for 32.3% of the world’s forex trades. The massive economic clout of Eurozone makes it the second most traded currency on the planet. Euro’s share in global forex trades is expected to increase further in the coming years.
1- US Dollar (USD)
The US dollar is by far the most traded currency in the world. It’s involved in 88.3% of global forex trades, and has a daily trading volume of $2.9 trillion. Issued by the US Federal Reserve, it is the most powerful currency out there. The US is the world’s largest and one of the most stable economies, which has helped the dollar become the world’s dominant currency.