May 23, 2020

The Top 5 Most Traded Currencies in the World

The Top 5 Most Traded Currencies in the World

The most traded currency in the world is the US Dollar (USD). According to the Bank for International Settlements, the USD accounts for a daily average volume of $2.2 trillion.

When it comes to forex trading, we know that currencies are all traded in pairs.

While EUR/USD tops the most traded currency pairs, let's break things down a little more and individually go over the most "heavily" traded currencies in the world.

The top 5 most traded currencies in the world are:

  1. US Dollar (USD),
  2. Euro (EUR),
  3. Japanese Yen (JPY),
  4. Great British Pound (GBP),
  5. Australian Dollar (AUD).

Here we’ve analysed each individual currency in detail, issuing a fact sheet on each to explain the factors that are most likely to influence its price.

1. US Dollar (USD)

The official currency of the United States of America, the US Dollar is also the world’s primary reserve currency.

The US Dollar comes in at number 1 on our list of the most traded currencies in the world, thanks to 87% of all currency trades involving the Greenback.

US Dollar Fact Sheet

US Dollar
US Dollar

Abbreviation: USD
Symbol: $ or US $
Nickname: Greenback
Most traded currency pair: EUR/USD
Most active trading session: New York and London sessions

Fun Fact: Then first US Dollar paper banknote was printed back in 1862. This was due to there being a shortage of coins at the time, with paper providing the quick fix required.

The most used currency in the world is the US Dollar

Issued by the Federal Reserve (the Fed), the US Dollar is the official currency of the United States of America.

Most traded currency. The US Dollar is the most traded currency in terms of daily average volume. According to the Bank for International Settlements, the USD has a daily trade volume of $2.2 trillion.

Global reserve currency. The US Dollar is also considered as the top global reserve currency. This means that it’s held by central and commercial banks throughout the world for the purpose of both investments and daily transactions.

Commodities priced in USD. When trading commodities such as gold, their tradable markets are priced in US Dollars as standard. On your forex trading platform, you can see this in action by opening up an XAU/USD market.

The United States of America is the world’s largest economy and USD price largely hinges on economic performance back home.

However, the global nature of the Greenback means there are also many external factors at play.

2. Euro (EUR)

The second widely traded currency is the Euro.

The Euro is the official currency used by 19 of the 27 member states of the European Union.

Euro Fact Sheet

strong euro currency
strong euro currency

Abbreviation: EUR
Symbol: €
Nickname: Fiber
Most traded currency pair: EUR/USD
Most active trading session: London and New York sessions

Fun Fact: When the EU was first created, only 12 countries used the Euro. The pioneer nations to first adopt the Euro were Germany, France, Luxembourg, Spain, Portugal, Austria, Ireland, Belgium, Finland, Greece, Italy and the Netherlands.

The second most traded currency in the world is the Euro

Issued by the European Central Bank, the Euro is the official currency of 19 members of the EU, allowing simple cross border transactions.

Volumes. According to the Bank for International Settlements, the Euro accounts for a daily average volume upwards of $800 million. The fact they denominate volume in USD however, highlights the Euro’s number 2 status.

Monetary policy issues. There are both pros and cons of a single, cross border currency adopted by multiple economies. The ability to pay for goods and services in different countries without the need to exchange currencies is a huge plus, but drawbacks include ceding control of monetary policy for the greater good of the entire block.

We recently saw an example of the above issue arise in Greece, where they were unable to devalue their currency to avoid a default.

While it’s been in existence for over 20 years now, the Euro remains largely a giant economic experiment that we continue to watch in awe.

3. Japanese Yen (JPY)

The Japanese Yen is the official currency of Japan and comes in third on our list of the most traded currencies in the world.

With a daily average volume of $550+ million (according to the Bank for International Settlements), the Yen also makes up 4.9% of global currency reserves.

Japanese Yen Fact Sheet

strong japanese yen currency
strong japanese yen currency

Abbreviation: JPY
Symbol: ¥
Nickname: Yen
Most traded currency pair: USD/JPY
Most active trading session: New York and Asian sessions

Fun Fact: The word “yen” means “circle” or “round object” in Japanese. Picture the shape of a standard coin and you’ll soon get why this was chosen!

The third most "heavily" traded currency in the world is the Japanese Yen

Issued by the Bank of Japan (BoJ), the Yen is considered a safe haven currency due to Japan’s ultra-low interest rates, low debt and high trade surplus providing stability.

Carry trade. The Japanese Yen drives the global carry trade. Investors borrow Yen at low interest rates and re-invest in higher yielding currencies offshore. By doing this, they lock in higher interest profit on their investment, than what they’re paying on the loan.

Safe haven status. The Yen is known as a safe haven currency. This is because during times of financial market volatility and fear, investors shed their riskier, high yielding assets and cover their currency positions in the lower yielding, yet more stable Japanese Yen.

With the global currency market landscape undergoing a transformation due to the prevalence of ultra-low interest rates, it will be interesting to see whether the Yen can maintain its safe haven status.

These are uncharted waters and only time will tell when it comes to the evolution of trading the Yen.

4. Great British Pound (GBP)

The official currency of the United Kingdom and its territories, the GBP is known colloquially as the Pound Sterling.

The UK is also the largest hub for forex trading, with the London trading session accounting for over 40% of daily turnover.

Great British Pound Fact Sheet

top 5 currencies British Pound
top 5 currencies British Pound

Abbreviation: GBP
Symbol: £
Nickname: Cable
Most traded currency pair: GBP/USD
Most active trading session: London and New York sessions

Fun Fact: The Pound Sterling is the oldest surviving independent currency. It’s history can be traced back to as early as 775AD in Anglo-Saxon England, when it was used as an equivalent to 1 pound weight of silver.

The fourth most important currency in the world is the Great British Pound

Issued by the Bank of England, the Pound is an iconic currency that plays an integral part within the institutional forex trading Hub of London.

By the numbers. The Great British Pound is the fourth most traded currency globally, with an average daily turnover of $325+ million (according to the Bank for International Settlements). GBP is also another major global reserve currency, trusted by foreign central banks for its stability.

Brexit uncertainty. The Brexit referendum has changed the global currency landscape for good. While the vote was held in 2016, it has taken years of political wrangling between the UK and Europe to get where we are now in 2020.

We now wait to see whether British politicians can negotiate a hard or soft Brexit.

The outcome of which, will no doubt determine the direction of GBP trading into the next decade and beyond.

5. Australian Dollar (AUD)

The Australian Dollar is the official currency of the Commonwealth of Australia.

According to the Bank for International Settlements, the Aussie Dollar is the 5th most traded currency in the world, mostly via the AUD/USD currency pair.

Australian Dollar Fact Sheet

Australian dollar
Australian dollar

Abbreviation: AUD
Symbol: $ or AU $
Nickname: Aussie
Most traded currency pair: AUD/USD
Most active trading session: Asian and New York sessions

Fun Fact: From 1910 to 1966, the official currency of Australia was the Australian Pound. 1 Australian Pound was made up of 20 Shillings, with each Shilling made up of 12 Pence.

The fifth most popular currency in the world is the Australian Dollar.

It is issued by the Reserve Bank of Australia and is also used by a number of Australian territories and Pacific Island nations that aren’t large enough to require their own monetary policy.

Commodity currency. The Australian Dollar is known primarily as a commodity currency. This is due to Australia being a major exporter of commodities such as coal and iron ore. As a result, commodity prices and global demand have a strong influence on the price of the Aussie.

Reliance on China. As the country’s largest trading partner, the Australian economy is strongly reliant on the Chinese economy. If Chinese demand for Australian exports rise, then demand for the Australian Dollar is going to increase price with it. However, keep in mind that the opposite is also true.

While just missing out on a place in the top 5 most traded currencies in the world, the Canadian Dollar is another commodity currency in the ilk of the AUD.

Where the price of the Australian Dollar tends to mirror fluctuations in iron ore due to Australia’s reliance on exports, the Canadian Dollar similarly mirrors the price of oil.

List of the 20 most traded currencies

Most traded currencies in the world

A more extensive list of the most traded currencies in the world, can be found within the following table:

# Currency Share of turnover (%)
1 US Dollar 87.62
2 Euro 31.27
3 Japanese Yen 21.56
4 Great British Pound 12.78
5 Australian Dollar 6.94
6 Canadian Dollar 5.13
7 Swiss Franc 4.73
8 Chinese Renminbi 3.97
9 Swedish Krona 2.22
10 Mexican Peso 2.20
11 New Zealand Dollar 2.06
12 Singapore Dollar 1.79
13 Hong Kong Dollar 1.73
14 Norwegian Krone 1.67
15 South Korean Won 1.65
16 Turkish Lira 1.40
17 Indian Rupee 1.14
18 Russian Ruble 1.14
19 Brazilian Real 1.00
20 South African Rand 1.00

Taking Advantage of the Most Traded Currencies in the World

So how might a forex trader take advantage of this list of most commonly traded currencies?

Choosing to trade a more liquid market, will allow you to more effectively manage risk. This is because a liquid market with supply/demand at every price level will ensure price action is smooth and gap-free.

Make sure you’re trading a forex currency pair that features the currencies featured in this list.