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. Trading

    Top 8 Most Tradable Currencies

    Currencies can provide diversification for a portfolio that's in a rut. Find out which ones you need to know.
  2. Trading

    Understanding the Federal Open Market Committee

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

    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?
  4. Trading

    The 6 Most-Traded Currencies And Why They're So Popular

    Every currency has specific features that affect its underlying value and price movements in the forex market.
  5. Investing

    Are The Markets Ready For an Interest Rate Increase?

    Learn why the bond market may not necessarily see an interest rate increase soon. Read about how the Federal Reserve will slowly raise interest rates.
  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. Trading

    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.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center