The Forex market offers great opportunities for success, with just about everyone able to access and play the market. However, playing the market and understanding it are two very different things and, in order to make it work to your advantage, it is well worth taking time to learn the basics of Forex trading. As the element that the forex market revolve around, it is currencies in particular that keen traders should take the time to understand; below are some of the most tradable on the Forex Market.
The US Dollar (USD)
The official currency of the United States, the US dollar (also known as the greenback and the buck) is the currency most used in international transactions and the one used as a benchmark for other major currency trades, in particular the euro, the yen and pound sterling.
The central bank of the US dollar is the Federal Reserve System, or “Fed”, created in 1913 by the Federal Reserve Act and is headed by a chairman and board of governors who supervise operations on the open market and monetary policy and interest rates.
The Euro (EUR)
The euro, managed by the European Central Bank (ECB), is the world’s second largest reserve currency and the second most traded after the US dollar. Introduced in 1999, the currency replaced the national currencies of many European Union member states, unifying them under a single official currency. Today, 17 EU member states use the currency, with many more nations using currencies pegged on the euro.
As a currency that transcends borders, policy surrounding the euro can be understandably complex. The ECB’s Executive Council is responsible for monetary policy and issuing banknotes, with the largest eurozone economies always represented. Its major commitment is to price stability, with consumer inflation the main focus of interest rate decisions.
Despite this complexity in organisation, the euro currency itself is simple and straightforward and often a slow mover in comparison to its other currency counterparts.
The Japanese Yen (JPY)
The thing to remember with the Japanese yen is that the currency is technically complex, but fundamentally simple. A major player, Japan has the world’s second largest economy and its currency, the yen, is overseen by the Bank of Japan. The BoJ governs everything from monetary policy to currency issuance to economic analysis, and works towards an end goal of economic stability.
On the forex market, the yen has a tendency to act as a ‘carry trade’ component, offering a low interest and consequently exhibiting extreme fluctuations when pitted against higher-yielding currencies, such as the Australian dollar and the British pound.