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“Major Currencies’ Characteristics and Aspects” Professional Investor in 3 minutes
We have summarized the very important points of each currency here.
There are mainly 8 Major Foreign Currencies in the world, determined by ISO, International Organization for Standardization.
And these Major Currencies have very unique aspects, correlations and roles in the market in each.
Know their characteristics, then you will know the Forex market.
USD – US Dollars
The USD is the main currency of the world. Any almost all currencies are quoted against USD.
Most commodities and international trades are done in USD.
USD is used as the major reserve currency by many Central Banks.
USD is the currency mainly focused by majority of investors, and economic news release related USD has greater impact than others.
EUR
EUR is relatively a new currency comparing to others as its paper note has appeared in 1999, and the coins came into existence in 2002.
EUR is issued and managed by the ECB, European Central Bank in Frankfurt, Germany.
The economic news and announcements by ECB has greater impact on EUR market price than others.
All members of the Eurozone have to meet the Maastricht Requirements by ECB.
USD/EUR is the most traded currency pairs in the world.
JPY – Japanese Yen
Japan has had deflation with huge impact and resulted in extremely low interest rates.
JPY is one of the Safe-Haven currencies when the market are in risk averse.
Japan has run a trade & current account surplus for much of the post 1971 era.
GBP – Great Britain Pound
GBP tends to strongly correlates with other currency pairs.
GBP is mainly priced relative to EUR, although GBP/USD is traded more actively.
GBP used to be a Petrocurrency, because of the north sea oil. But with the diminishing flow of oil for over the years, UK has become an oil importer.
GBP tends to be pro-cyclical.
AUD, NZD and CAD
Three of the major currencies in the world. JPY, USD and EUR are traded more than these currencies.
AUD, NZD and CAD are called as Commodity Currencies, as their economies are depending on mainly produce of Commodities.
AUD, NZD and CAD are strongly correlates with Commodity prices and signs of global growth that indicates the demand for Commodities.
AUD and CAD are mostly correlated to Energies such as Coal and Oil.
NZD is mostly correlated to agricultural Commodities.
AUD and Chinese growth are correlated strongly as Australia exports commodities mostly to China. On the other hand, Canada exports mostly to US.
