The 5 Most Important Currencies In The World

The global currency market sees about $5.3 trillion traded per day. That amount is so vast that it would take a month of trading on the New York Stock Exchange to equal the amount of forex trading in just one day.

By value, the top 5 traded currencies are the US dollar, Euro, Japanese Yen, British Pound, and Australian Dollar.

US Dollar

The US dollar is by far the most important currency in the world and is also a reserve currency. That means that governments all over the world hold large amounts of greenbacks because a reserve currency is kind of like a world currency. Suppose Egypt wants to trade with Argentina. The Egyptians want Argentinian beef but the Argentines don’t necessarily want to conduct the transaction in Egyptian pounds as holding Egyptian currency isn’t that useful to them. Both parties might agree then to conduct the trade using US dollars.

It is the dollar’s status as the most dominant reserve currency that leads it to be the most important currency and most widely traded one to boot, representing nearly half of all forex trades.

Euro

If the Dollar is the gold-medallist in the forex Olympics, then the Euro would take the silver. The Euro is the second-most held reserve currency. In fact, all the top five traded currencies are reserve currencies – which explains in part why they are traded so much.

After World War II, the German Deutsche mark was the most-important reserve currency after the dollar. Once the Euro came into force, replacing the Deutsche mark and other European currencies, it retained the title.

p2

Yen

At nearly $6.8 trillion, the Japanese economy is one of the biggest, and the Yen has a similar place of importance in the forex world. Originally introduced in 1871, the value of Yen was fixed to silver and gold, much like other currencies at the time. After World War II, the Yen lost much of its value and ended up being fixed at the rate of 360 yen to 1 dollar. Today one US dollar is worth 113 Yen (as of October 25, 2017).

British Pound

The British Pound was the world’s dominant reserve currency for much of the 19th century as well as the first half of the 20th century, just as the British Empire started to fold. In 1950, the pound sterling accounted for more than half of the world’s foreign currency reserves. Just a few years earlier, sterling made up nearly 90% of global forex reserves.

Today it only makes up about 5%-10% of all currency trading and consistently makes up under 5% of all forex reserves.

The decline of the British pound is a story that the US should remember, as a once dominant currency can easily fall of its lofty perch within a decade.

Australian Dollar/Canadian Dollar

We mentioned earlier that countries like to hold foreign currency in reserve, to better facilitate trade or even to manage their credit more efficiently. We know about how the US dollar is the most popular reserve currency, making up more than 60% of all foreign currency reserves. Next is the Euro, followed by the British pound and the Yen. Of the 5% of foreign reserves that are marked as “other,” the Canadian and Australian dollar are often the currencies that are most widely held. The Swiss franc isn’t far behind.

Sometimes a great legacy or history dictates whether or not a currency becomes a reserve currency and by extension, an “important” currency. Other times it is purely market forces that create reserve currencies. For instance, the Canadian dollar acts as the second currency for American markets (north and south), and there are also a lot of trade links between Canada and Europe that pushes demand for Canadian currency.

What do you think the next dominant reserve currency will be? The Chinese Yuan? Indian Rupee? Or maybe even the Russian Ruble?

January 2, 2021 Update: We have just announced our BEST STOCK NEWSLETTER of 2020 AWARD!

CLICK HERE to find out which stock newsletter was up 78% in 2020 (and whose 2019 picks are now up 113%).

*** Our Award for BEST STOCK NEWSLETTER of 2020 ALERT ***

Updated January 2, 2021

At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others--The Motley Fool Stock Advisor.

Five of their 2020 stock picks have doubled and the average return of all 24 of their stock picks for 2020 is up 78%!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's 5 years and 120 stock picks. As of Friday, January 1, 2021 the Motley Fool's January stock pick (TSLA) is up 720%, their March pick (ZM) is up 172%, their April pick of SHOP is up 226% and their June pick CRWD is up 120%; and another two have more than doubled. In addition, 10 of their 2019, 12 of their 2018, 11 of their 2017, 15 of their 2016. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 209%--tht means over the last 5 years their stock picks, on average, have TRIPLED!

Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. The important thing about the Fool stock picks is you have to buy them the day they are recommended because they usually pop 5-10% in the first 72 hours after the release their recommendation. You sure don’t want to risk missing out on their next pick.

Normally the Fool service is priced at $199 per year but they are currently offering a NEW SUBSCRIBER DISCOUNT that allows you to get theiir next 24 stock picks for just $99/year. HERE is the LINK to visit their New Subscriber Discount page.

CLICK HERE to get access to all The Motley Fool’s Stock Picks and their next 12 months of picks for just $99 per Year! 



GET UP TO $1,000 IN FREE STOCK

WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT

Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW (before it’s too late)



2 responses to “The 5 Most Important Currencies In The World”

  1. Yu Anju says:

    hey great update..

  2. Leon says:

    thanks this will help me with my homework