The Forex market is considered as the most liquid market and also the biggest one in the whole world. No doubt, people are gaining so much interest in the market as it gains trillions of dollars being traded every day.
Contemplating the governments, companies, banks, and even individuals who need foreign currency, you will understand how huge trade Forex can become.
In the Forex market, participants gather together to exchange currencies and this is referred to as the sport Forex market. The standard time of delivery for this is at least 2 days.
The Spot Forex is an OTC market that is not run by any central exchange, unlike stock trading. The trades that are made in this market are mainly agreed by both transacting countries. As for retail traders, they have a Forex broker.
In terms of the most traded currencies, the top three spots belong to The American Dollar (USD), Euro (EUR), and the Japanese Yen (JPY).
The American Dollar (USD)
88% of currency transactions made in the Forex market involve USD. They are considered as the ‘most traded currency in the world’.
Taking a peek back to history, USD was the ‘world’s reserve currency’ in 1944. This was part of the new world order by the end of the Second World War when all other currencies were attached to it.
To prove its supremacy, other nations aside from the U.S such as Panama, El Salvador, and Ecuador utilize USD as their official currency.
The Euro (EUR)
After USD, EUR is regarded as the second most traded currency in the Forex market. It is also the second-largest currency reserve in the world.
Ever since it was introduced on January 1, 1999, to another 11 countries, 19 countries started using EUR including Cyprus, Austria, Estonia, Belgium, Finland, Germany, France, Greece, Lithuania, Ireland, Italy, Latvia, Malta, Lithuania, Netherlands, Luxembourg, Slovakia, Portugal Spain, and Slovenia.
These groups of countries are being referred to as the Eurozone.
The Japanese Yen (JPY)
The third most traded currency in the Forex market is the Japanese Yen (JPY). It is also known as the most liquid currency in all of Asia. It is also the 4th currency reserve in the world next to the USD, Euro, and Pound Sterling.
Japan is currently experiencing unstable economic growth and they also have very high debts. But then, traders are confident in Japan’s economy because it is more stable compared to other major world economies. The country is also a haven when it comes to uncertainty and high market volatility.
The most popular currency pairs which are being traded in the Forex market are EUR/USD with 23% of all the transactions made in the market. followed by USD/JPY, GBP/USD with 17.7%, and 9.2% respectively.
As to the currency pairs that are worth trading, it all depends on the trader. For short term trade Forex, the trader needs to focus more on the currency which is most traded especially during a tight bid/ask spread. For long term trading, traders don’t necessarily need to look for the pairs with the most liquid and volatility.