Best Currencies to Trade and Why They’re Popular

March 28, 2018
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Knowing the best currency pairs will be essential for anyone getting started in currency trading as a form of investment. While you can in theory trade any currency in the world, the reality is that there are only a small handful of currencies that make up the majority of global trades. These currencies are popular for different reasons, and we’ll go into more detail with six of them below.

Best Currencies:

Canadian Dollar (CAD $)

The Canadian Dollar is commodity driven, as is the overall Canadian economy. This can make it an easier currency to predict as it is closely tied to oil prices and raw material prices. When there are movements in the oil market and other commodity markets, there will usually be some reflection in the Canadian Dollar.

While the currency can fluctuate, there are rarely large movements, thanks to the conservative and strong fiscal policy of the country.

Japanese Yen (JPY ¥)

Sometimes looked at as a go between, the Japanese Yen is used by some traders to purchase another currency that they are interested in (where trade pairings are more favorable with the Yen). The Japanese economy typically has low interest rates which makes for a fairly constant fiscal situation. However, there are periods of volatility in the Yen, so be careful if you plan to hold this currency for long periods of time.

Australian Dollar (AUD $)

Much like the Canadian Dollar, the Australian Dollar is tied heavily to commodity markets. Australia is a major exporter of minerals including Lithium, as well as agricultural products. This Dollar often performs strongly against the United States Dollar, and it’s one of the ten most traded currencies in the world. Australia experiences little political friction, both internally and internationally, which makes for a stable economy and a strong reserve bank.

United States Dollar (USD $)

Without doubt the world’s most popular currency for trading, the US Dollar is what many other currencies use as a benchmark. It is the main reserve currency for banks around the world, and most international transactions are performed in USD.

Why is it popular for investment? Because it’s safe. The United States Dollar will always have value, although some investors do need to play the long game in times when it is down when compared to other major currencies. At this time in 2018, the USD is one of the most valuable currencies in the world, performing better than the majority of competing trade currencies.

Euro (EUR €)

The Euro is backed by a collective of nations in the EU, and like the USD is one of the strongest currencies in the world. The currency maintains value because of the diversification of the economies it covers. The Euro managed to maintain value throughout a debt crisis and the financial collapse of Greece, showing that it has resilience to major financial events within the countries it is used in. The Euro performs well against all world currencies, including the USD, but still provides enough movement to make for a great trade pairing.

British Pound (GBP £)

The British Pound is quite unique in the way that it has high value, but also goes through periods of high volatility. Often trading at a higher value than both the Euro and the United States Dollar, the Pound is one of the major currencies that brave traders like to hold. Investing in this currency when it hits a low can allow for some significant gains, as the Pound has shown an extraordinary ability to bounce back from dips in recent years.

Whenever choosing currency pairings for investment, always look at the history, relevant financial and political news, and only invest what you can afford to lose. Like any investment market, Forex carries a level of risk that needs to be respected.

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