Forex currencies are always traded in pairs. For example,
EUR/USD, which means Euro over US dollars, would be a
typical pair. In this case, the Euro, being the first
currency can be called the base currency. The second
currency, by default USD, is called the counter or quote
currency. As mentioned, the first currency is the base,
therefore in a pair you can refer the amount of that
currency as being the amount required to purchase one unit
of the second currency. So, if you want to buy the currency
pair, you have to buy the EURO and sell the USD
simultaneously. On the other hand, if you are looking to
sell the currency pair, you have to sell the EURO and buy
the USD. As a part of forex trading strategies the most
important thing is to understand the currency pairs, or
more precisely in a Forex transaction, what currency you
will be selling or buying. Having good knowledge of major
currencies of the world is important while learning forex
trading.
Major currencies US Dollar – The United States dollar
is the world’s main currency – a universal
measure to evaluate any other currency traded on Forex. All
currencies are generally quoted in US dollar terms. Under
conditions of international economic and political unrest,
the US dollar is the main secure currency, which was proven
particularly well throughout the past Southeast Asian
crisis. As it was indicated, the US dollar became the
leading currency toward the end of the World War II, as the
other currencies were almost pegged against it.
Euro – The Euro was designed to become the premier
currency in forex trading by simply being quoted in
American terms. Like the US dollar, the Euro has a strong
international presence stemming from members of the
European Monetary Union. The currency stays plagued by
inadequate growth, high unemployment, and government
resistance to structural changes. The pair was also weighed
in 1999 and 2000 by outflows from foreign investors,
particularly Japanese, who were forced to liquidate their
losing investments in euro-denominated assets.
Japanese Yen – The Japanese Yen is the third most
traded currency in the world; it has a much smaller
international presence than the US dollar or the Euro. The
Yen is very liquid around the world.
British Pound – Until the end of the Second World
War, the Pound was the currency of reference. The currency
is heavily traded against the Euro and the US dollar, but
has a spotty presence against the other currencies.
Swiss Franc – The Swiss Franc is the currency of a
major European country that belongs neither to the European
Monetary Union nor the G-7 countries. Although the Swiss
economy is relatively small, the Swiss Franc is one of the
four major currencies, closely resembling the strength and
quality of the Swiss economy and finance. Typically, it is
believed that the Swiss Franc is a stable currency.
Canadian Dollar - Canada decided to use the dollar instead
of a Pound Sterling system because of the ubiquity of
Spanish dollars in North America in the 18th century and
early 19th century and because of the standardization of
the American dollar. The Province of Canada declared that
all accounts would be kept in dollars as of January 1,
1858, and ordered the issue of the first official Canadian
dollars in the same year.
Australian Dollar - The Australian Dollar was introduced in
February 14, 1966, not only replacing the Australian Pound
but also introducing a decimal system. Following the
introduction of the Australian Dollar in 1966, the value of
the national currency continued to be managed in accord
with the Bretton Woods gold standard as it had been since
1954. Essentially the value of the Australian Dollar was
dealt with reference to gold, although in practice the US
dollar was used.
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Andrew Daigle is the owner, creator and author of many
successful websites including ForexBoost at
http://www.ForexBoost.com and
http://forex-trading-system.typepad.com , Free Forex
Training Resource for the Novice and Advanced Forex trader.
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