In Economics there are three possible definitions for a currency: major, minor or exotic. Exotic currencies are those, such as the Uruguay Peso or the Thai baht, that are not easily traded in a standard brokerage account. It is not a matter of how large the Nation minting coins is, it is about the depth of its market. Exotic currencies are illiquid and trade at low volumes. It is different from being a minor currency: non-American dollars are minor currencies, but their trading is broader than those of exotic currencies. Those differences, however, are mostly theoretical: all currencies contribute to the Foreign Exchange (Forex) Market with the same importance because the Market is founded on them all. Most major banks and central banks, like the United State's Federal Reserve to mention one, depend on the Market as exclusive domain.
The fluctuations of the Forex Market not only mean substantial profits that affects citizens and bank account holders as well, they mean also that countries are gradually becoming dependant on each other. Internal changes have extended results in other countries' economies. Economic activities tend to alter the currency's value and interest rate not only in the local market. Local wealth is, instead, affected by the monetary performances abroad, in the Forex Market. The collapse of a local market could mean the collapse of others as well in return.
Certain banks have invested up to the 30% of their funds into buying foreign currencies, obtaining from this source up to the 60% of their total profits. The American public has only recently opened up to this market. This is related to two main aspects. One is the accessibility to general traders and investors: the Forex Market has always been accessible to those in the know only, while local investments were more common. The other factor is the minimum account requirements: now a private investor can open the account with less than $10,000 instead of the $200,000 required before.
The Forex Market is dominated by five major currencies: the European Euro (EUR), the British Pound GBP) and Swiss Franc (CHF) from the Old Continent, the Japanese Yen (JPY) and the U.S. Dollar (USD).Their high rate (due to their high trade volume and market depth) accounts for the majority of the trading activity in North American alone. Minor currencies such as the other dollars, in spite of an increasing difficulty in being traded, still accounts for up to 7% of the total market volume. Minor and major currencies together represent the stable trading activity in the Forex Market.
Each currency has its specific Index that describes their relative strength. The most traded currencies are the U.S Dollar, the Euro and the Yen. In the past twenty years the U.S. Dollar Index has gradually dropped, as a reflection of the international mistrust of financial policies resulting in large budget deficits.
The European Economic Area (EEA) or, as many economists confidentially call it, the “Euroland” covers under a single currency 11 states and a total population of 300 million people, accounting for almost 20% of the world's economy. It represents America's largest foreign market and their trade activity back and forth has been in close balance for nearly a quarter of a century.
The Japanese market is one of the most stable economic strongholds in today's global market. Post-war governments have applied all possible resources into its development, with the result that the Yen is the third most traded currency, behind those of two lager, in terms of territory, federations.
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