However, at this time, the greenback is still the world’s reserve currency. Because of this, all the other major currencies are quoted in relation to the U.S. dollar. The most influential factors in the pricing of the dollar come from the policies of the U.S. Federal Reserve, which is the central bank of the United States, and the U.S. Treasury.
The euro is the currency of the European Union and is second only to the U.S. dollar in terms of reserves held by other countries and central banks. Because of this, the EURUSD is the
most heavily traded currency pair. The most influential factors in pricing the euro against other currencies are the policies of the European Central Bank. A consideration in understanding European Central Bank policies is that rather than speaking for one independent entity or country, it must balance the economic interests of many.
The Great Britain pound is arguably the oldest of the major currencies, with its issuer, the Bank of England, having been around since the 1600s. It is ranked third in currency reserves held around the world. GBPUSD is a heavily traded currency pair that in recent history has been a leader among the majors, having led the rally in 2006 and 2007 and having topped in 2008 and led the majors lower from there.
The Japanese yen is a very influential currency in that the Japanese economy is the second largest in the world and that nation’s currency is the primary Asian representative in the forex markets. The central bank of Japan is the force behind the yen and is known for being more active than the other major central banks when it comes to managing the national currency.
The Canadian dollar is an influential currency because of the richness of that country’s natural resources; the fact that it shares a border with the United States, the world’s largest economy; and its European connections on its eastern coast and its Asian connections on its western coast. Canada is a truly 24-hour-a-day country.
The Australian dollar has become more and more influential over the last two decades as that country has become a major exporter of commodities to the growing Asian economies. Its location on the “global clock” also makes it an attractive currency for traders working the “third” shift: 4 p.m. to midnight Eastern Standard Time.
Source: Major Currencies
