US Dollar (USD)
The US Dollar is by far the most widely traded currency. In part, the widespread use of the us dollar reflects its substantial international role as “investment” currency in many capital markets, “reserve” currency held by many central banks, “transaction” currency in many international commodity markets, “invoice” currency in many contracts and “intervention” currency employed by monetary authorities in market operations to influence their own exchange rates.
In addition, the widespread trading of the US Dollar reflects its use as a “vehicle” currency in foreign exchange transactions, a use that reinforces its international role in trade and finance.
If one currency is selected as the vehicle currency and used for transactions, there would be a total of nine currency pairs or exchange rates to be dealt with (that is one exchange rate for the vehicle currency against each of the others), whereas if no vehicle currency were used, there would be 45 exchange rates to be dealt with. In a system of 100 currencies with no vehicle currencies, potentially there would be 4,950 currency pairs or exchange rates.
Like the US Dollar, the Euro has a strong international presence and over the years has emerged as a premier currency, second only to the US Dollar.
Japanese Yen (JPY):
The Japanese Yen is the third most traded currency in the world. It has a much smaller international presence than the US Dollar or the Euro. The Yen is very liquid around the world, practically around the clock.
British Pound (GBP):
Until the end of world war II, the pound was the currency of reference. The nickname Cable is derived from the telegrams used to update the GBPUSD rates across the Atlantic. The currency is heavily traded against the Euro and the Us Dollar, but it has a spotty presence against other currencies.
Swiss Franc (CHF):
The Swiss Franc is the only currency of a major European country that neither to the European Monetary Union nor to the G-7 countries. Although the Swiss economy is relatively small, the Swiss Franc is one of the major currencies, closely resembling the strength and quality of the Swiss economy and finance. Switzerland has a much closed economic relationship with Germany and thus to the Euro zone.