Discovering the Top 15 Most Tradable Currencies in the Market

Introduction

In today’s globalized world, the distances are smaller than ever before. No one is immune to the effects of the global economy and currency fluctuations. As a result, the interest in trading across global stock markets and forex markets is also increasing.

Forex trading is the only 24/7 market in the world. The international forex trade stood at $ 2.73 quadrillion as per this report. Just try to sink in the numbers!

When it comes to forex trading, the first thing a trader should look for is a tradable currency. Currencies are traded in pairs; not all currencies are readily available or fluid enough for trading. 

This blog will discuss the top 15 most tradable currencies globally and what makes them tradable.

What Makes a Currency Tradable?

There are 170 currencies traded worldwide, but not all of them are traded in the same proportion. So, what makes a currency tradable? Here are the factors you should see:

• Liquidity: If a currency can be readily bought and sold in real-time without affecting its value, it is considered liquid.
• Volatility: The frequency with which the price of a currency changes within a period.
• Market Depth: It is the ability of a market to digest bulk orders without extreme volatility.
• Economic Stability: A currency backed by the strong economy of the issuing country is more stable for trading.

Criteria for Selection

How can you choose the top tradable currencies? Here are the criteria:

• Trading Volume: A currency with a high trading volume is more liquid. Hence, traders prefer such currencies.
• Global Economic Impact: The economically significant countries’ currencies are tradable.
• Stability and Volatility: Traders like both stability and volatility to make profits. A currency that can balance these traits is tradable.
• Market Availability: Currencies readily available to trade are more popular among traders.

Top 15 Most Tradable Currencies

Here are the 15 most tradable currencies in the world:

USD (US Dollars)

USD is the world’s primary reserve currency and dominates global forex trading. It is highly liquid and is backed by a stable U.S. economy. Most of the petroleum trade in the world is carried out using the USD, the biggest currency in the world.

EUR (Euro)

The Euro is the official currency of the Eurozone and is the second most traded currency globally. The Eurozone plays an important role in global trade and provides a stable currency.

JPY (Japanese Yen)

JPY is a widely traded currency in Asia. Powered by the strong Japanese economy and high liquidity, it is a favorite for traders.

British Pound (GBP)

Once the dominant currency in the world, the GBP still retains itself as a significant global currency. Britain enjoys both political and economic influence making GBP a popular currency.

AUD (Australian Dollars)

Another tradable currency is the AUD. Australia is one of the biggest commodity exporters in the world, and its currency is tied to these commodities, making it highly stable. As a result, more traders prefer it.

CAD (Canadian Dollars)

Canada is another country highly rich in natural resources and commodity exports. Similar to the AUD, the CAD also enjoys the benefits of stable pricing. CAD also enjoys its status due to the correlation between oil prices.

CHF (Swiss Franc)

Switzerland is famous for its safe-haven status. Its political neutrality and strong financial stability help make it one of the most tradable currencies.

CNY (Chinese Yuan)

China has transformed its economy through sustained growth for many years. Being the largest exporter in the world and having an influence on global markets make the CNY an attractive currency.

NZD (New Zealand Dollars)

New Zealand is Australia’s next-door neighbor and is rich in commodities. This commodity price correlation makes it a stable and tradable currency.

SEK (Swedish Krona)

Sweden is a stable economy within the EU. Its high liquidity and strong economy make SEK a sought-after global currency.

NOK (Norwegian Krone)

Norway’s commodity-linked currency based on its oil exports strengthens and stabilizes NOK in global trade.

KRW (South Korean Won)

The rapid economic growth of South Korea has fuelled its currency with liquidity and global market presence.

SGD (Singapore Dollars)

Singapore is a financial hub, the world’s busiest transshipment port, and the biggest tourism hub in Southeast Asia. Hence, SGD is one of the most tradable currencies.

HKD (Hong Kong Dollars)

Hong Kong is a financial hub with one of the largest stock markets in the world. International traders prefer to invest in the Hong Kong markets. HKD is also pegged to the USD, which provides the stable outlook necessary for a tradable currency.

INR (Indian Rupees)

India is the fastest-growing major economy in the world, and everyone wants to invest in it. It is the major workforce provider in the world. The biggest global diaspora and increasing global influence coupled with a growing economy are leading to the rise of INR.

Major Currency Pairs

USD is the biggest currency in the world. Hence, the currencies paired with the USD are the most liquid. Here are the widely popular tradable currency pairs:

• EUR/USD
• JPY/USD
• GBP/USD
• CHF/USD
• AUD/USD
• CAD/USD
• NZD/USD
• INR/USD

Here, USD is called the Base Currency, and the value shows the price of other currencies against 1 USD.

Factors Influencing Currency Trading

• Economic Indicators: Indicators like GDP growth rate, inflation, interest rates, employment, etc, play a huge role in shaping the currency markets.
• Political Stability: As forex trade is an international market, political stability plays a pivotal role in a currency’s strength.
• Market Sentiment: The currencies traders perceive as more stable and reliable are most traded.
• Fiscal and Monetary Policies: Policies made by the central banks and governments are important for the strength of a currency.
• Trade Balances: A country that exports more has a stronger currency compared to the one that imports more.

Trading Strategies for Top Currencies

Here are a few strategies that currency traders use:

• Follow the trend: Identify the current market trends using moving averages and other technical indicators and follow them.
• Carry Trade: High-interest currencies depreciate faster compared to low-interest-rate currencies. You can borrow in the low-interest currency and invest in a high-interest currency to earn the interest rate differential.
• Range Trading: Check the support and resistance levels to identify the range of a currency. But at the bottom prices and sell at the top prices.
• News-based Trading: Keep yourself up to date with global happenings and trade currencies based on economic news.

Importance of Currency Diversification

Diversification in forex markets refers to dealing in more than one tradable currency. Having exposure to a wider range of currencies hedges you against fluctuation risk. Here’s why you should diversify:

• It reduces the volatility risk
• You get the maximum opportunity to increase your returns
• A diversified portfolio is more stable

Conclusion

Learning about tradable currencies and how they are traded in the forex markets can help you start and build your forex trading game. You can apply different trading strategies and diversify your portfolio to reduce the risk and maximize your returns.

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