Trading Forex has become easier than ever mainly because of the advent of the internet. This is more so with the affordable rates in internet access and data connection. Do you know what currencies are most attractive when it comes to trading?
Not all currencies are tradeable
There is a strong reason why known currencies like the US Dollar, the British Pound and the Japanese Yen are used all across the world. While many countries have and practice their own currency, not each one is as tradeable as the other.
Difference among the currencies
As an investor or broker, besides learning the basics of Forex and interpreting charts, you need to understand the difference of each currency to determine which can be traded in Forex market. Conducted correctly, the results can be rewarding and you are on your way to earn more profits. If you are still unsure on which currencies can be traded, look no further as here are some practical tips and guides for you.
U.S. Dollar (USD)
This is perhaps the no-brainer in Forex trading. If you do not trade USD, there is really isn’t anything else to trade. Regulated by the Federal Reserve, it is often referred to as the Almighty Dollar. This currency came about in 1913 under the Federal Reserve Act, it has a sophisticated governing system related to how it is circulated and its value.
The USD is often called the greenback and it is the currency of the United States, arguably the largest economy in the world. Its value is supported and governed by a lot of factors. Besides that, the central bank and it is the benchmark used for trading with other currencies.
European Euro (EUR)
The European Central Bank or ECB is the Central Bank that handles the Euro. Besides the USD, the Euro is seen as the other large currency. Its headquarters is in Frankfurt in Germany and is membered by 17 countries. Monetary policy decisions and other issues are handled by the ECB.
The ECB is also involved and responsible for issuing banknotes for the Euro. In most cases, it is regarded that the Euro is a lot more stable as compared to the other currencies paired with the USD. The base currency could trade about 30 to 40 pips each day.
Japanese Yen (JPY)
This is perhaps the largest currency in Asia. The Japanese Yen is among the oldest currencies in the world. In fact, it has been dated to 1882. Unknown to many, the Japanese Yen is actually the currency of the second largest economy in the world. Its central bank is the Bank of Japan. With its low interest rated, the Yen is traded with higher-yielding currencies which is why traders of this currency would go for longer-term investments.
British Pound (GBP)
The Bank of England is the central bank of what is known as The Queens’ Currency. This is the organisation which functions much like the US’ Federal Reserve System. Although England was once the Euro, the economy never surrendered the British Pound’s value. Since Brexit, the British Pound has become more prominent than ever. Its value has often been seen as more volatile as compared to the Euro.
Swiss Franc (CHF)
The currency of what is known as the most neutral and stable country in the world would be every investor’s favourite. The Swiss National Bank is the central bank for this currency but its role differs from other central banks. Trading the Swiss Franc is quite different as it is not a very volatile currency. Its average move daily would be about 35 pips.
Canadian Dollar (CAD)
In many markets, the Canadian Dollar is often seen as a stand-alone. However, its value is very attractive as this currency tends to follow the USD in many ways. The Bank of Canada is the central bank that governs the CAD which was started in 1934. On a daily basis, this currency goes about 30 to 40 pips. Among the common practice here is that the Canadian Dollar has an inclination with crude oil.
Australian/New Zealand Dollar (AUD/NZD)
The Australian and New Zealand Dollar is popular because it has one of the higher interest rates under the Reserve Bank of Australia. Carry traders love these currencies and they offer among the best yields among the other major currencies. Expect the currencies to pip about 30 to 40 each day.