Whether you are planning on buying a second property abroad, want to send money to family or friends in another country or perhaps are hoping to take a long holiday overseas, the chances are you will be watching the currency market.
The exchange rates can fluctuate significantly but knowing more about the currency can help provide a better insight into the market.
Whilst there are countless different currencies in the world, the below is a guide to five of the top countries which might be of interest.
1) US dollar
Often referred to as the world’s unofficial currency, the US dollar holds great sway not just in America but all over the globe.
The US dollar is the most traded currency on the planet and along with three other currencies – the yen, sterling and the euro – is responsible for more than three out of every four foreign currency transactions in the world.
Because of its global significance, the US dollar can be very easily affected by world events, particularly anything relating to oil. This is partially because oil is priced in US dollars, no matter where in the world it is being sourced. Therefore, the price of oil itself can exert an undue influence on the performance of the dollar in the market.
However, the good news is that because of the huge demand for the US dollar, it is a very liquid currency which means that should you want to trade it you could get extremely competitive rates using the services of an online currency broker.
The US dollar and the price of oil are strongly interlinked
2) The euro
One of the babies in terms of world currency, the euro has only been around in physical form since 2002 but now is used in 17 of the 27 eurozone nations.
Despite its relatively recent creation, it is also accepted in other countries outside the 17 nations that use it, and international payments to other European nations as well as places further afield such as Cape Verde are often made in denominations of the Euro.
In some countries, the price of goods is also given in their old currency as well as the Euro. As the exchange rate between them was fixed at the time of the change, this makes it easy to calculate the worth.
3) The yen
The currency of Japan, the yen is the third most traded currency in the world and is also used by governments around the world together with the Euro, sterling and the US dollar.
The value of the yen is often quite a bit lower compared to other nations than it could be, primarily as a result of traders using the very low Japanese interest rate as a means of borrowing funds to invest in other countries.
The yen is also quite unique in its use of coins as well as banknotes. The currency is available in coin form up to 500 yen, which is worth around £4, making it the highest coin-based currency in the world.
4) The Australian dollar
Not just the fifth most commonly-traded currency, the Australian dollar is renowned for being vividly coloured with unique features and artwork. Some of these measures are quite simply spectacular, such as transparent windows which contain hidden pictures – such as Captain Cook – the technology for which is not used in any other currency on the planet.
However, the AUS dollar is not simply attractive to collectors, it also moves up and down with the commodities market ie/mining, agriculture and so on. This means its value is usually moving in the opposite direction to those considered as reserve currencies (such as the US dollar and sterling). Reserve currencies are usually viewed as safe havens and strengthen during difficult economic times whilst ‘riskier’ currencies such as the Aus dollar rise during financial booms.
The exotic-looking Australian dollar – peer closely at the blue $10 bill and you will be able to make out the innovative clear panel with a small picture laid over it
5) The dinar
The currency known as the dinar is used in Tunisia, an increasingly popular holiday destination. However, despite the number of tourists which visit the country, the dinar is subject to much tighter restrictions than applies to other holiday hotspots’ currency.
Any export or import of significant sums of dinar is strictly forbidden, other than in very specific circumstances such as the sale of a property. However, even then any profits may not be withdrawn in dinar, only the capital investment.
Tourists leaving with more than the equivalent of £500 in dinar must declare it at Customs. All duty-free shops display the price of goods in alternative currencies such as sterling, the euro or US dollar and special ATMs which provide a conversion service can easily be found.
The above five currencies are just a small snapshot of what’s available but illustrate perfectly the different ways in which currencies are affected by world affairs and the great variety of laws and rules that govern them. Using an online broker (such as www.international-payments.co.uk/) for all your currency needs, big or small, will not only net you the most competitive deal but also act as an invaluable source of advice on a very complex subject.