Currencies

In order to operate easily and safely in the Forex market, it is necessary for the various brokers to know currencies, the real protagonists of each of their operations. It should be stressed from the outset that not all currencies have equal importance in the currency market. In fact, there are some currencies whose exchange accounts for almost all of the operations carried out within the Foreign Exchange Market; these currencies are divided into Majors, Minors and Exotics.

The currencies that are included among the Majors are the most liquid, and that facilitates the possibility of interchanges between them, accounting for about 90% of all currency sales. Each one of these currencies is also linked by their limited volatility in comparison to currencies of lesser importance. The US dollar clearly belongs in this main category, having been recognized as the country’s official currency since 1785. It is known by the USD code. It has emerged as a major bargaining chip, even when compared to petroleum products and gold coins. Its value is so important that it is used as a reserve currency outside the United States. Even the very young Euro currency is part of the Majors. Expressed by the letters EUR, this currency appeared on the international market in 1999, but only began to circulate in European countries that decided to adopt it in 2002. Born out of the Maastricht Treaty of 1995, it is managed by the European Central Bank to enable it to compete at both a European level and in the world market.

Immediately following those two major currencies is a trio formed by the British pound, the Yen and the Swiss franc. The pound, or British pound, identified by the code GBP, is used throughout the UK and was initially linked to the value of silver. From 1880, its exchange rate was regulated by the Gold Standard, but in 1914, the UK came off the gold standard, a decision followed by all the central banks of all the countries that took part in the First World War. The Yen, distinguished by the code JPY, has been the official currency of Japan since 1872. It was pegged to the dollar between 1949 and 1971 in compliance with the Bretton Woods agreements, and has since established itself as one of the most interesting currencies within the Forex market. The Swiss franc, which is recognized by the letters CHF, it is the sixth most used currency in the world. The strength of the Swiss franc in the face of the continuous devaluation of the Euro has recently forced the Swiss National Bank to peg its value against the Euro, effectively fixing the rate at which the two currencies can be exchanged.

A second trio of currencies completes the circle of major currencies that are traded in the Forex. The Australian dollar, recognised by the code AUD, began to circulate in 1966, replacing the Australian pound, while the Canadian dollar, known by the code CAD, officially entered into force in 1871 by unifying the monetary system of a country which, until then, had traded with British pounds and US dollars. Finally, there is the New Zealand dollar, which has been widespread in that country since 1967, replacing the New Zealand pound. It is identified by the code NZD.