The currency market is the largest and most liquid among the financial markets. The daily trading volume on it comes to over three trillion dollars. The main part of this amount, however, is concentrated in the major currency pairs. Leading in volume are the markets in London, New York and Tokyo. Institutional investors, such as banks, hedge funds and central banks are the main players in the market, performing the biggest part of the volume transactions. So, in order to be competitive and to take profit from the forex market, individual investors must be extremely knowledgeable and flexible.
Each transaction in the currency market involves two currencies – selling of one currency and buying another. Trading is realized through the so-called currency pairs. An example of a currency pair is EUR / USD. The transaction with this pair can be in two directions. When we talk about buying, this means that investors buy euros and sell dollars. When we talk about selling – it means that investors sell euros to buy dollars.
Here are the most commonly traded currencies and their share of total transactions:
Currency Name Market share
USD U.S. Dollar 83.70%
EUR Euro 60.00%
GBP British Pound 15.30 %
JPY Japanese Yen 13.40%
CHF Swiss Franc 9.50%
SEK Swedish krona 2.20%
AUD Australian dollar 2.10%
CAD Canadian Dollar 1.60%
The total share of all currencies tends to two hundred, because of the fact that a foreign exchange transaction involves two currencies. As basic currency for the Central Banks reserve around the world, the USD has the largest share in trading and it is one of the currency in transactions that constitute 83.7% of the total ones. The second most popular currency is the euro with a share of 60%. Far behind the top two leading currencies with relative share remains the third most popular one – the British pound with a share of 15.3%. There come the Japanese yen by 13.4% and the Swiss franc by 13.4%.
