Forex currencies are always traded in pairs. For example, EUR/USD, which means Euro over US dollars, would be a typical pair. In this case, the Euro, being the first currency can be called the base currency. The second currency, by default USD, is called the counter or quote currency. As mentioned, the first currency is the base, therefore in a pair you can refer the amount of that currency as being the amount required to purchase one unit of the second currency. So, if you want to buy the currency pair, you have to buy the EURO and sell the USD simultaneously. On the other hand, if you are looking to sell the currency pair, you have to sell the EURO and buy the USD. As a part of forex trading strategies the most important thing is to understand the currency pairs, or more precisely in a Forex transaction, what currency you will be selling or buying. Having good knowledge of major currencies of the world is important while learning forex trading.
Major currencies US Dollar – The United States dollar is the world’s main currency – a universal measure to evaluate any other currency traded on Forex. All currencies are generally quoted in US dollar terms. Under conditions of international economic and political unrest, the US dollar is the main secure currency, which was proven particularly well throughout the past Southeast Asian crisis. As it was indicated, the US dollar became the leading currency toward the end of the World War II, as the other currencies were almost pegged against it.
Euro – The Euro was designed to become the premier currency in forex trading by simply being quoted in American terms. Like the US dollar, the Euro has a strong international presence stemming from members of the European Monetary Union. The currency stays plagued by inadequate growth, high unemployment, and government resistance to structural changes. The pair was also weighed in 1999 and 2000 by outflows from foreign investors, particularly Japanese, who were forced to liquidate their losing investments in euro-denominated assets.
Japanese Yen – The Japanese Yen is the third most traded currency in the world; it has a much smaller international presence than the US dollar or the Euro. The Yen is very liquid around the world.
British Pound – Until the end of the Second World War, the Pound was the currency of reference. The currency is heavily traded against the Euro and the US dollar, but has a spotty presence against the other currencies.
Swiss Franc – The Swiss Franc is the currency of a major European country that belongs neither to the European Monetary Union nor the G-7 countries. Although the Swiss economy is relatively small, the Swiss Franc is one of the four major currencies, closely resembling the strength and quality of the Swiss economy and finance. Typically, it is believed that the Swiss Franc is a stable currency.
Canadian Dollar – Canada decided to use the dollar instead of a Pound Sterling system because of the ubiquity of Spanish dollars in North America in the 18th century and early 19th century and because of the standardization of the American dollar. The Province of Canada declared that all accounts would be kept in dollars as of January 1, 1858, and ordered the issue of the first official Canadian dollars in the same year.
Australian Dollar – The Australian Dollar was introduced in February 14, 1966, not only replacing the Australian Pound but also introducing a decimal system. Following the introduction of the Australian Dollar in 1966, the value of the national currency continued to be managed in accord with the Bretton Woods gold standard as it had been since 1954. Essentially the value of the Australian Dollar was dealt with reference to gold, although in practice the US dollar was used.
Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost, a free Forex educational site to learn Forex trading strategies and a ForexBoost blog for keeping online Forex trading records.