As there are hundreds of currencies available, it is not feasible to monitor each one. The key currencies are the US Dollar in the US, the Euro in the Eurozone, the Pound in the United Kingdom, and the Yen in Japan.
Generally, each country maintains its own currency. However, there are instances where multiple countries form an alliance and adopt a common currency, such as the Eurozone. It’s essential to note that some European Union members retain their own currencies. Additionally, some countries peg their currency’s value to another currency. For instance, several Caribbean and central American countries maintain stable, fixed exchange rates to the US Dollar, while other countries may peg their currency to the Euro.
Traders should familiarise themselves with the ISO (International Organisation for Standardization) currency codes, as these abbreviations are widely used by market participants. The ISO 4217 standardizes alpha and numeric codes for currency representation, offering information about the relationships between individual currencies and their minor units. Currencies are also associated with symbols, helping to distinguish between them. Some of the main ones include the USD for the US dollar, EUR for the Euro, GBP for the UK pound, AUD for the Australian Dollar, CAD for the Canadian dollar and CHF for the Swiss Franc. There is a unique abbreviation for every currency, with the most popular and most traded listed in the table below:
| Currency | Code | Symbol |
|---|---|---|
| United States Dollar | USD | $ |
| Great Britain Pound | GBP | £ |
| Japanese Yen | JPY | JP¥ |
| Euro | EUR | € |
| Swiss Franc | CHF | ₣ |
| China Yuan | CNY | CN¥ |
| Australian Dollar | AUD | A$ |
| Canadian Dollar | CAD | C$ |
| Russian Ruble | RUB | ₽ |
| Indian Rupee | INR | ₹ |
How does currency trading work?
The concept is similar to buying stocks. When you believe that a company is doing well, you buy shares with the expectation that the share price will increase in value. With foreign exchange, instead of buying shares in companies, you buy “shares” of countries with the same logic, i.e. their currencies. If you believe that the economy of a specific country is doing well, you expect its currency to appreciate, prompting you to buy the currency.
