Best Forex

By: EconomyWatch   Date: 23 July 2009

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EconomyWatch

The core Content Team our economy, industry, investing and personal finance reference articles.

EconomyWatch, Content Team

 

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To survive and make profits in the highly-volatile forex market, one should focus on investing in the best forex pairs. There are five major currencies (currencies in which the majority of the world's foreign transactions are denominated). The value of local currencies is usually expressed in terms of these currencies. The major currencies are:

Abbreviation

Name

Nickname

Symbol

USD

US Dollar

Greenback, Buck

$

EUR

Euro

Fiber

€

JPY

Japanese Yen

Yen

¥

GBP

British Pound

Sterling, Cable

£

CHF

Swiss Franc

Swissy

The other main currencies of the world are:

Abbreviation

Name

Nickname

Symbol

CAD

Canadian Dollar

Loonie

C$

AUD

Australian Dollar

Aussie

A$

NZD

New Zealand Dollar

Kiwi

NZ$

How to Identify the Best Forex Currencies?

 

There are a number of factors one can check to identify the best currency pairs. These factors can be broadly categorized under three heads:

  • Economic factors: The economic policies issued by the government and central banks often define the progress of a currency. The policies directly influence the supply and the price of the currency. Other factors include:

      • Balance of trade
      • Inflation
      • Economic development and stability
      • Country’s fiscal deficit

  • Market psychology: Sentiments surrounding some recent economic or political development often leads to wide fluctuations in currency prices. To identify the best forex, it’s important to know whether the market psychology is right or purely speculative. This, of course, comes with time. There are some currencies that are more impacted by market sentiment than others.

  • Political conditions: Political changes cause turmoil in the forex market. The currency of a nation with political instability is usually weak.

 

The Best Forex Currency Pairs

There are seven currency pairs that are the most liquid. All of these are traded against the US dollar. These are:

  • EUR/USD: Euro and US Dollar

  • USD/JPY: US Dollar and Japanese Yen

  • GBP/USD: British Pound and US Dollar (commonly known as Cable)

  • USD/CHF: US Dollar and Swiss Franc

  • USD/CAD: US Dollar and Canadian Dollar

  • AUD/USD: Australian Dollar and US Dollar

  • NZD/USD: New Zealand Dollar and US Dollar

The other major currency pairs are also known as currency crosses. These are:

  • EUR/GBP: Euro and British Pound

  • EUR/CHF: Euro and Swiss Franc

  • EUR/JPY: Euro and Japanese Yen

The major currency pairs are popular because of the economic stability of the respective nations and the stable international relations with each other. Other favorite pairs arise with changing international relations. Thus, it is important for traders to stay abreast of world trade and economic policies.


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