Correlation of Currencies and the Global Exchange Market

Currency in some shape has been around for quite a few years now. Long ago money, in the shape of coins, was used to facilitate trade all over the world. Over time, the currency marketplace developed as a way of benefiting from these economic fluctuations. There are so many ways you can profit with this market and, if you’re interested, there is much information available on the internet.

The value of the currency will depend largely on the country it comes from. Economic powerhouse nations such as China, India, and the United States enjoy steady growth and trade that allow them to buy large amounts of currency, allowing them to trade freely with each other. Many nations, in fact, print their own currency to help stabilize their economy when they need a little help in dealing with difficult times. These nations’ currencies appreciate when their economy grows, giving their citizens better purchasing power. This has a ripple effect on other economies, giving every nation involved an opportunity to gain from the currency marketplace.

With a floating exchange rate, foreign currency is allowed to float, or move up and down, against that of the dollar. A floating exchange rate keeps one currency strong against another while forcing the other currency down. This is done so that foreign countries with stronger economies can purchase more of the dollar that is needed to support their own economies. In the process, they take control of the dollar that they need to continue trading in the foreign currency marketplace.

Some foreign currencies are traded on the London market. One of the largest, the Euro, is often the first to appreciate when the US dollar strengthens and depreciates against the respective currencies. One of the currencies most vulnerable to this type of fluctuation is the British pound, which is tied closely to the euro. The euro often appreciates versus the dollar when the British pound strengthens significantly, which causes financial players in Britain to take extreme measures to protect their currency. The same thing happens when the US dollar weakens versus the Japanese yen. This action causes traders in Japan to sell their dollar denominated assets in order to gain back some of their investment from the US dollar strengthening.

The two major currencies that are usually the target when a country wants to raise its value are the US dollar and the Japanese yen. Many traders use these two as the starting point for their trading pairs, with the euro usually joining them at some point in the process. Other currencies that follow closely behind are the Canadian dollar and the Australian dollar. All of these economic powerhouse currencies play important roles in the global financial markets, influencing millions of dollars in transactions each day.

Another way that the currency market influences economies is through the buying and selling of physical money. When a nation issues currency, it usually issues a certain amount of coins known as legal tender. When a nation’s economy requires a large amount of money, it usually issues more than the legal limit of the currency, creating a need for investors who can purchase these rare coins in order to make money on their currency exchanges. Private citizens also usually issue coins in an attempt to create wealth for themselves.