As we've learned, the forex market is truly a global marketplace, and the economics behind the currencies we trade are a major driver in the market. By gaining a greater understanding of the history and economic policies behind some of the most traded currencies in forex, we can learn why forex traders trade certain pairs and how you can be successful doing the same. So let's take a closer look at the eight (it's actually nine, but who's counting?) most-traded currencies in forex. (Read Forex Courses Teach Beginners How To Trade for more information.)

1. U.S. Dollar (USD)
Central Bank: Federal Reserve (Fed)
Current Interest Rate Information: Link here

The Almighty Dollar
Created in 1913 by the Federal Reserve Act, the Federal Reserve System (also known as the Fed) is the central banking agency of the U.S. The Fed is headed by a chairman and board of governors, with the majority of the focus being placed on the branch known as the Federal Open Market Committee (FOMC). The FOMC supervises open market operations as well as monetary policy, namely interest rates.

The FOMC is made up of five of the 12 current Federal Reserve Bank presidents and seven members of the Federal Reserve Board; the Federal Reserve Bank of New York has a permanent seat on the committee. Even though there are 12 voting members, non-members (including additional Fed Bank presidents) are invited to share their views on the current economic situation whenever the committee meets, which is eight times per calendar year. (For more information on the Federal Reserve, read our Federal Reserve Tutorial.)

Also referred to as the greenback, the U.S. dollar (USD) is the domestic currency of the world's largest economy, the United States. Just like any other currency, the dollar is supported by numerous economic fundamentals, including gross domestic product, manufacturing and employment reports. However, the U.S. dollar is also greatly influenced by the central bank and any announcements about interest rate policy. The U.S. dollar is a benchmark that trades against every other major currency, especially the euro, Japanese yen and British pound. (For further reading about trading this currency, see Taking Advantage Of A Weak U.S. Dollar.)



European Euro

Related Articles
  1. Markets

    Understanding the Federal Open Market Committee

    The Federal Open Market Committee is the branch of the Federal Reserve Board that determines monetary policy.
  2. Markets

    Regional Banks Give The Fed A National Perspective

    We all know that the Federal Reserve utilizes monetary policy to control the economy, but what do the 12 regional Federal Reserve Banks do?
  3. Markets

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  4. Markets

    What are the Federal Reserve Chairman's responsibilities?

    Learn about the duties and responsibilities of the chairman of the Federal Reserve Board, including testifying before Congress and as chair of the FOMC.
  5. Markets

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  6. Trading

    The Forex Market: Who Trades Currency And Why

    The forex market has a lot of unique attributes that may come as a surprise for new traders.
  7. Markets

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  8. Markets

    Explaining the Federal Reserve System

    The Federal Reserve System is the central bank of the United States. It regulates monetary policy and supervises the nation’s banking system.
  9. Markets

    Why Lloyd Blankfein Has a Positive Outlook on the Economy (GS)

    Avoid unpleasant surprises by paying attention to economic data relied upon by the Federal Open Market Committee (FOMC) when making decisions on monetary policy.
  10. Markets

    Will the Federal Reserve Hike Rates in April?

    Here's a look at what the Federal Reserve will or won't do in April and why.
Trading Center