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Foreign Currency Exchange: What It Is And What It Does

Foreign Currency Exchange: What It Is And What It Does



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The Major Currencies in the Forex Market and Factors that cause its to Fluctuate

By : Joon Trader
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In Forex Trading, US Dollar, Japanese Yen and the Euro dollar combined are the globe three major economic powerhouses and also the major currencies in the Forex market.

The US dollar is the most dominant currency in today world's Interbank Forex market. The four next most traded currencies are the Euro dollar, Japanese Yen, British Pound and Swiss Franc. Though the Forex market comprises of almost all the currencies on earth, these four currencies traded against the US Dollar make up the majority on the Forex market and are known as major currencies or the majors.

Currencies are traded in pairs and each currency has its own symbol. For the Euro dollar- it is EUR, Japanese Yen - it is JPY, for the Pounds Sterling - it is GBP, and for the Swiss Franc - it is CHF. Hence, EUR/USD would be Euro-Dollar pair. GBP/USD would be pounds Sterling-Dollar pair and USD/CHF would be Dollar-Swiss Franc pair and so on and so forth.

You will always see the USD quoted first with few exceptions such as Pounds Sterling, Euro Dollar, Australia Dollar (AUD) and New Zealand Dollar (NZD. The first currency quoted is called the base currency.

The cumulative buy and sell of a currency causes it to move either up or down. There are numerous factors that cause the fluctuation of exchange rate.

* Central bank monetary policy and balance of payment. * A country's political, social and fundamental economic environment such as economic growth rate, inflation and interest rate. * The inflow and outflow of capital between nations - be it physical or portfolio flow. * Central bank abilities to back up it own currency during speculative attack will provide faith to calm its currency price. * Speculative activities by professional currency manger with billions of funds can also sometimes move the market.

Movement of the currencies is ultimately dictated by demand and supply. However, predicting demand and supply in Forex Trading is not as simply one would think.

About the author:
JoonTrader is the owner of forexdiscover. For further recommended resources on how to make money in Forex Trading. Click here to grab the secret to consistent pips.
A Forex Trader trading his own hard-earned money

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