Which currencies are traded most on forex?

Each country of the world has its own currency, and while all of them have a place in the forex market, there are a few actively traded with good liquidity. The in-demand currencies regularly traded are those of the countries that are most economically vibrant and politically stable. Unsurprisingly, the U.S. dollar is by far the most actively traded currency in forex, with some estimates indicating 88% of all forex trades involve the U.S. dollar. Besides the U.S. dollar (USD) there are seven other major currencies that are the most traded. These are the Euro (EUR), British Pound (GBP), Japanese Yen (JPY), Canadian Dollar (CAD), Australian Dollar (AUD), New Zealand Dollar (NZD) and the Swiss Franc (CHF).

The most traded currency pairs in forex

Currencies are traded in pairs and with the eight most traded currencies above there is a possibility of creating 27 different currency pairs. Only seven of the pairs qualify as widely traded with large amounts of liquidity. We call the largest four the major pairs and these are the EUR/USD, the USD/JPY, the GBP/USD, and the USD/CHF. Besides these four major pairs there are three less popular pairs, sometimes called the commodity pairs because of the strong connection to commodities from one of the base currencies. These commodity pairs are the AUD/USD, the USD/CAD and the NZD/USD. These seven pairs account for most of the speculative trading in forex markets, although some other combinations (EUR/JPY, GBP/JPY, EUR/GBP) also see decent volume. Based on data from the Bank for International Settlements the USD is the dominant currency and was a part of 88% of all trades in April 2016. With nearly all the trading volume in the forex markets concentrated in 18 pairs it is far less broad than the stock market. That makes forex trading more manageable due to the limited number of choices as compared to the thousands of choices available to equity traders.