The U.S. dollar (USD) holds a dominant position in the global Forex market, and it is indeed the most traded currency. Approximately 85% of all Forex transactions involve the U.S. dollar in one way or another. This reflects its status as the world's primary reserve currency and its widespread use in international trade, finance, and investment.
Euro (EUR) as the Second Most Traded Currency:
The Euro (EUR) comes in second in terms of Forex trading volume, with a share of about 39%. The Euro is the official currency of the Eurozone, which comprises 19 of the 27 European Union member states. It is a major player in the Forex market, with significant liquidity and a vital role in global financial markets.
Japanese Yen (JPY) as the Third Most Traded Currency:
The Japanese Yen (JPY) is the third most traded currency, accounting for approximately 19% of all Forex transactions. Japan's strong economy and its status as an important exporter contribute to the demand for the Yen in international trade.
USD in Major Currency Pairs:
The U.S. dollar is a part of every major currency pair, often referred to as the "majors." Major currency pairs involve the USD paired with other major currencies, such as EUR/USD (Euro/USD), USD/JPY (USD/Japanese Yen), and GBP/USD (British Pound/USD). The USD's presence in these pairs makes them some of the most actively traded and liquid instruments in the Forex market.
Majors Dominate Forex Trading:
Major currency pairs, which include the USD, EUR, JPY, GBP, and other major currencies, comprise a substantial portion of all Forex trades. They are known for their high liquidity and are favored by traders and investors for their stability and predictability. These major pairs collectively represent approximately 75% of all Forex trading volume.
In summary, the U.S. dollar's prominence in the Forex market is a testament to its role as the world's primary reserve currency and its significance in global trade and finance. While other currencies like the Euro and Japanese Yen also play essential roles, the USD remains the dominant force in Forex trading, accounting for the majority of transactions and driving liquidity in major currency pairs.