Most Traded Currencies in the World - International Trading

Here is a list comprising the top ten most traded currencies in the world:

1. US dollar (USD):

The Federal Reserve (Fed) issues the US dollar which is the country's official currency. It contributes to an average volume of US$2.9 trillion per day, making it the most traded currency in the world. Its popularity can be attributed to a variety of factors. The United States has the largest economy in the world and serves as a global trade powerhouse. Central and commercial banks hold the US dollar as the primary ‘reserve currency’ for global transactions and investments. It is speculated to account for almost 63% of the total currency reserves.

Commodities such as copper, oil, and gold are sold in dollars. The dollar's value is mainly affected by US economic performance and commodity demand. However, variations in the financial performance of nations using the dollar - either officially or de facto, can also impact the value of the US dollar.

2. Euro (EUR):

The Euro, issued by the European Central Bank (ECB) serves as the official currency of the European Union (EU). It accounts for an average daily volume of close to US$1.1 trillion. The euro's popularity comes primarily from the scale and economic clout of the region in which it serves - the eurozone. Furthermore, it is the second-largest reserve currency in the world, accounting for about 20% of worldwide reserves in terms of volume. The bloc's political and economic developments have a significant impact on the value of the euro.

3. Japanese yen (JPY):

The third most traded currency in the world is the Japanese yen, the official currency of Japan. Issued by the Bank of Japan (BoJ), it has an average daily volume of $554 billion. The Japanese yen accounts for 4.9% of the world's currency reserves. The value of the yen is heavily reliant on the strength of the Japanese economy, in particular, its manufacturing sector which produces key exports such as electronics, automobiles, textiles, machinery, ships, etc. Many forex traders remain vigilant to economic releases because the yen’s value often rises simultaneously with the demand for these products.

4. The pound sterling (GBP):

The United Kingdom’s official currency is the pound sterling. It accounts for an average volume of nearly US$422 billion per day thereby making it the fourth most traded currency globally. It also ranks as the fourth largest reserve currency, accounting for 4.5% of the world's reserves in terms of value. The performance of the UK economy has a major influence on the value of the pound. The Bank of England's (BoE's) monetary policies, employment reports, inflation rate statistics, gross domestic product (GDP) are some factors that potentially impact the pound’s value.

5. Australian dollar (AUD):

Next on the list of the top 10 most traded currencies in the world is the Australian dollar, the official currency of the Commonwealth of Australia. The Reserve Bank of Australia (RBA) is responsible for issuing the Australian dollar. With an average volume of US$223 billion per day, it is in the sixth position when it comes to the most traded currencies globally. The Australian dollar contributes to 1.8% of the world’s reserves in terms of value. The ‘terms of trade’ and commodity rates are two important factors impacting its value.

Australia primarily exports copper, coal, oil, and iron and thus, modifications in the trading volumes and costs of these commodities may have a direct effect on the Australian dollar. The size of Australia's international liabilities also affects the value of its currency. If this factor rises, the value of the Australian dollar compared to the currencies of its top trading partners is likely to decline.

6. Canadian dollar (CAD):

Canada's official currency is the Canadian dollar which is also the sixth-most traded currency in the world. Estimated to account for a daily average volume of US$166 billion, it is the fifth most popular reserve currency. The Bank of Canada (BoC) is the issuer of this currency. Similar to Australia, Canada is abundant in natural resources and mainly exports commodities. Therefore, the prices of these products can play a significant role to evaluate the value of the Canadian dollar.

The United States is Canada's primary trading partner, making up more than 75% of total exports and 50% of total imports. Thus, the value of CAD is directly impacted by the US economy's performance as well as the US dollar’s value.

7. Swiss franc (CHF):

The Swiss National Bank (SNB) is authorised to issue the Swiss franc which is Switzerland’s official currency. It is the eighth most widely used reserve currency, accounting for 0.18% of global reserves. It has an average volume of US$164 billion per day. The Swiss franc has become a safe-haven currency due to its stellar track record for banking secrecy and financial services. As a result, it usually increases when there is financial instability around the world.

Nations within the eurozone purchases approximately 50% of Swiss exports. Therefore, the euro's strength and economic health have a substantial effect on the value of Swiss franc.

8. Chinese renminbi (CNH):

The official currency of the People's Republic of China is the Chinese renminbi. The People's Bank of China (PBoC) issues this currency. Also known colloquially as the 'yuan,’ it makes up average volume of US$142 billion per day. Although it is a developing currency, it is the seventh most widely held reserve currency, accounting for 1.23% of all world reserves.

China mainly exports manufactured goods and commodities. Thus, the country’s terms of trade with important trading partners like Europe and the United States has considerable effects on the Chinese renminbi’s value.

9. Hong Kong dollar (HKD):

The Hong Kong dollar is Hong Kong's official currency. With a daily average volume of US$117 billion, it ranks as the ninth most traded currency in the world. The Hong Kong Monetary Authority (HKMA) issues HKD$10 notes. The Hongkong and Shanghai Banking Corporation (HSBC), Bank of China, and Standard Chartered Bank are authorised to issue all other denominations. Between April 2016 and April 2019, HKD turnover doubled, which pushed the currency from 13th to ninth place globally.

The uncertainty associated with Hong Kong's political situation may have boosted trading volume. This has raised the volatility of HKD pairs and opened up possibilities for profit.

10. New Zealand dollar (NZD):

New Zealand’s official currency is the New Zealand dollar, and it stands as the tenth most traded currency in the world. Issued by the Reserve Bank of New Zealand, it contributes to an average volume of US$68 billion per day. The value of the New Zealand dollar is heavily influenced by the country's trading relationships, the strength of its trading partners' currencies, and the value of its imports and exports. China and Australia are New Zealand's two major trading partners.

It is a major exporter of agricultural products like meat and dairy and its primary imports are cars, oil, and machinery. The value of NZD is mainly influenced by the Reserve Bank of New Zealand's monetary policies. If interest rates are higher than those offered in other nations, the currency is estimated to appreciate.