In this article we will explore the nine top currencies in the world. They shape economies, trade relationships, and investment opportunities around the world. What exactly makes them so popular? Let’s dive in and find out.
What is currency?
Currency is a system of money that people and institutions widely use and accept as a medium of exchange in a specific country or region. It is a tool for buying and selling goods and services, measuring value, and storing wealth. Each nation or group of nations typically issues its currency, and the government or a central authority backs it. Various economic, political, and market factors determine the currency’s value.
The main types of currencies are:
fiat currency, issued by governments, such as the US dollar, euro, and Indian rupee. It is not backed by any commodity like gold or silver. It has value because the government recognizes it as a medium of exchange. A fiat currency is a legal tender — that means it is obligatory to use it as a payment method. Fiat currencies can lose value over time due to inflation.
fiduciary money is a currency that two parties agree to use in a transaction. It is not legal tender.
commodity money, based on a physical good like gold, silver or other tangible items. It has intrinsic value outside of being a medium of exchange, because it can be used in trade or for its material utility — golden coins, for instance. It is less common today. In forex, the term “commodity currency” refers to money whose value moves with the prices of the main commodity products, because the issuing country depends on the export of the certain commodity. For example, AUD is a commodity currency.
cryptocurrency, or simply crypto, is a digital form of currency based on blockchain technology like Bitcoin or Ethereum. It works through a computer system and does not rely on any government or authority. A cryptocurrency is not the same as a virtual currency.
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The role of currencies in the global economy
Currencies play a critical role in the global economy, facilitating international trade, investment, and economic stability.
There are several key roles currencies play.
They facilitate international trade, enabling companies from different countries to trade goods and services across borders, converting one currency to another.
The global foreign exchange market (forex) allows currencies to be traded against one another, determining exchange rates. These rates influence all industries from trade, to tourism, directly or indirectly.
Some currencies, like the US dollar and euro, act as global reserve currencies held by central banks and governments to stabilize their economies. Reserve currencies are an important tool for international trade settlements and backing national currencies.
Currencies facilitate cross-border investments like, bonds, or real estate in another country, boosting investment and economic growth.
Central banks use currencies to ensure economic stability and policies. It can be by implementing monetary policies, influencing inflation, unemployment, and growth. For instance, by adjusting interest rates, a central bank can strengthen or weaken its currency to impact exports and imports.
Overview of the 9 top currencies in the world
US dollar
History and significance
The US dollar was first introduced in 1792. Initially tied to gold and silver (a commodity currency), after World War II it replaced the British pound as the world’s primary reserve currency. In 1971, the US abandoned the gold standard, and since then the dollar’s value has been based on trust in the strength of the US economy and its political stability. The US economy is considered the strongest in the world due to the country’s central role in world trade and finance, which makes the US dollar a stable and trustworthy currency.
Role in the global economy and international trade
USD is dominating the forex market: it is involved in almost 90% of all forex transactions in the world.
You might have heard the term “petrodollar” — USD is the primary currency for international trade in crude oil (as well as other commodities).
A lot of central banks hold USD as part of their foreign exchange reserves.
Countries that use it
The United States is not the only country that uses dollars. For example, USD runs in Ecuador, El Salvador, Panama, and Zimbabwe as their official currency. Besides that, in many countries around the world dollars are accepted unofficially.
Euro
History and significance
The euro is the currency of most countries of the European Union. The euro originated in 1999 in a non-physical form: it was used in accounting, electronic payments and banking, and only became physical three years later. It was created to foster European unity, promote economic growth, and simplify trade among the European Union countries.
Role in the global economy and international trade
The euro is the second most traded and held currency globally, after the US dollar. It symbolizes economic integration, stability, and strength among the EU member states.
It is the currency for almost 40% of the worldwide payments across borders and for almost 50% the EU’s exports.
It makes approximately 21% of global forex transactions.
Along with USD, it is a reserve currency which central banks worldwide hold.
Countries that use it
EUR is the official currency in 20 of the 27 EU countries. However, EUR runs in various states outside of the EU: the overseas territories of Spain (Canary Islands and Ceuta and Melilla), Portugal (the Azores and Madeira), France (Mayotte and Réunion, Saint Pierre and Miquelon, French Guiana and French Islands in the Caribbean), and the European microstates of Andorra, Monaco, San Marino and Vatican City. Also, Montenegro and Kosovo use euros but are not members of the EU.
Pound sterling
History and significance
Not only is the British pound the world’s oldest currency still in use (it has been around for more than 1200 years), but it also remains a key currency in the global finance world, reflecting the UK’s historical and current economic influence.
Role in the global economy and international trade
GBP is the fourth most traded currency globally (after ESD, EUR and JPY) in forex markets — over $7.5 trillion a day.
Sterling is very stable, and for many it is a refuge currency in times of economic turmoil.
The Bank of England’s monetary policies significantly influence the pound’s value and global economic activities.
Countries that use it
Apart from the UK, it is used in British overseas territories.
Japanese yen
History and significance
When Japan modernized its economy during the Meiji Restoration, it introduced the yen. After World War II, the yen stabilized, becoming integral to Japan’s post-war economic miracle. The Japanese economy is Asia’s second-largest, and the yen often serves as a safe-haven currency in times of financial instability.
Role in the global economy and international trade
JPY is the third most traded currency, involved in 17% of global forex transactions.
It plays a significant role in global investment, particularly in the bond market.
Japan’s economy heavily relies on exports, including industries like technology and automobiles, which strengthens JPY’s international importance.
Countries that use it
The yen is the official currency only in Japan.
Australian dollar
History and significance
The Australian dollar is the successor to the Australian pound. It is sometimes referred to as the Aussie. Initially it was pegged to the British pound before transitioning to a floating system in 1983. AUD is a commodity currency, its value is closely tied to Australia’s resource-driven economy, particularly exports of iron ore, coal, and gold.
Role in the global economy and international trade
The Australian dollar is often traded in forex markets due to its liquidity and correlation with commodity prices. Also it is popular in the Asia-Pacific region and among investors seeking high-yield returns.
Countries that use it
AUD is the official currency in Australia, Kiribati, Nauru and Tuvalu.
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Canadian dollar
History and significance
1858 is the year when the Canadian dollar was adopted. It became a floating currency in 1970. As well as the AUD, CAD is another commodity currency, influenced by oil, natural gas, and other natural resource exports.
Role in the global economy and international trade
There is a significant demand for CAD in the forex markets: it is the fifth most traded currency globally.
Historically it is strongly tied to the US: the economies of the two countries are deeply interconnected.
Countries that use it
CAD is official in Canada.
New Zealand dollar
History and significance
In 1967 the New Zealand dollar replaced the New Zealand pound. It is informally known as the Kiwi. The NZD is a smaller currency than AUD, but it is significant in the Asia-Pacific region due to New Zealand’s agricultural and dairy export dominance.
Role in the global economy and international trade
It provides high yields in the forex markets, which makes it appealing for investors from all over the world.
As we mentioned before, NZD dominates in the market of agriculture and dairy in the region, so demand for these products heavily influences NZD.
Countries that use it
NZD is official in New Zealand, Cook Islands, Niue, Tokelau, and Pitcairn Islands.
South Korean won
History and significance
Following World War II, South Korea experienced rapid economic development. The South Korean won (KRW) was introduced in 1962. It reflects South Korea’s position as a global leader in technology and manufacturing.
Role in the global economy and international trade
South Korea is one of the major exporters of semiconductors, cars, and electronics — it heavily influences the won’s value. South Korea grows as a global economic power, and its currency is becoming increasingly important in Asian financial markets.
Countries that use it
It is the official currency in South Korea.
Chinese yuan
History and significance
The yuan gained international importance when China became the world’s second-largest economy. It is a part of the IMF’s Special Drawing Rights (SDR) basket, which makes it a significant currency globally.
Role in the global economy and international trade
China has promoted the yuan actively in international trade in recent decades, and it is popular in Asia and Africa.
Countries that use it
It is used officially in China, but individuals and businesses widely use it in trade with partner countries, particularly in Asia.
Why these currencies are more popular than others, and why choose them
There are several main reasons that make the listed currencies the first choice for a lot of people and businesses.
All of them belong to countries with robust economies that contribute significantly to the global GDP. There are strong financial institutions, political stability, and opportunities for economic growth.
Central banks hold many of these currencies (for example, USD, EUR, GBP, JPY, CHF) in reserve, which increases their value and global importance.
They are used for trading internationally, especially for commodities and high-value goods.
As for the forex market, their trading volumes are huge — their liquidity and accessibility makes them convenient and popular among individuals and companies.
Forecasts for major currencies in the coming years
All the forecasts are connected to various economic indicators and, therefore, can change based on the developing economic situation and worldwide events.
In the short term, analysts expect EURUSD to vary between $1.05095 and $1.06917 with an incline to the lower figure. But in the medium term experts predict the rate to rise to $1.1449 by the end of 2025 or even $1.296 by 2027 in the best-case scenario.
GBPUSD will probably stabilize around $1.25325 and $1.28174 in the next few quarters and strengthen by the end of 2025.
The experts predict that AUDUSD will remain relatively stable in the short term, but in the long term it can lower to $0.64126 by the end of the next year.
USDJPY is predicted to rise in the following year, with a median value of 163.28.
Summary
Currency is a strong tool that governments, businesses and individuals use to grow their wealth. Each currency and currency pair has its use, its benefits and drawbacks. The world of currencies is a dynamic and complex one, with each currency playing a unique role in the global economy. We have looked into nine top currencies in the world, and from the stability of the US dollar to the growing influence of the Chinese yuan, all nine of them have significant weight in international trade and finance.
