What Are Currencies in the Foreign Exchange Market?

Currencies are one of the most important international trade topics today. A currency in the simplest sense is currency in circulation, usually in use as a medium of trade, usually circulating coins and banknotes, when in circulation. The different currencies are usually recognized by their ISO or International Standardization Organization. Some of the major currencies are the U.S. dollar, the British pound, the Euro, Japanese yen, Swiss franc and the Australian dollar. One of the major leading currencies used as a trade currency is the Australian dollar.

Currencies trade on the foreign exchange market (forex) and can either be bought or sold. The price of a particular currency is usually determined by how it affects other currencies. Currencies are usually traded on the over the counter basis. This means that the currencies can move rapidly between different brokers. Foreign exchange brokers usually manage the trading by keeping a margin in a given currency. The trades are usually executed through software applications.

There are two main trading pairs in the Forex: the USD/JPY and the USD/CHF. The U.S. dollar is traded more frequently with the CHF. Traders can use any one of these pairs. More often, traders will switch currencies if their long position takes them into one direction while their short position takes them into another. However, it should be noted that the trades are not fluid.