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The
Euro in the Forex Markets
The Forex, also called the foreign exchange
market is the largest and most liquid trading market in the
world. Unlike the stock exchange, the Forex does not have a
certain trading place or closing time. Instead, over $2 trillion
are traded and sold every day. The Forex never closes and trading
takes place twenty-four hours a day during the business week.
There are currently six
major currency pairs that are used
and traded each day on the Forex. These six pairs account for
up to 90 percent of the trading activity each and every day.
These include the euro and the US dollar (EUR/USD), the Japanese
yen and the US dollar (JPY/USD), the US dollar and the Swiss
Franc (USD/CHF), the Australian dollar and the US dollar (AUD/USD),
the British pound and the US dollar (GBP/USD) and the US dollar
and the Canadian dollar (USD/CAD).
Each of these currencies operates a little differently in
the Forex and fluctuates a little on a daily basis. The Euro
is very important in the foreign exchange currency. It does
not just represent one country, but a total of twelve
countries in Europe. The countries that are members of the European Union
and recognize the Euro as currency are Austria, Belgium, Finland,
France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and Sweden. Out of the fifteen members of
the European Union, only two do not recognize the euro as the
official currency. These are Denmark and the United Kingdom.
Sweden only began using the euro in 2005.
Currently the euro is comparative to the US dollar and is
worth about 90 cents to the dollar. In 1999, all of the European
countries locked the value of their own currencies in relation
to the euro. This means that all of the currencies were worth
about the same as the euro. These countries soon began using
the euro as their currency so that the money could be used
across the borders and used without the need for getting other
forms of currency. This transition helped make the euro worth
more and become a more accepted form of currency.
The use of a single currency across many countries has both
advantages and disadvantages in relation to the Forex. One
of the biggest benefits of the euro is that the exchange rate
is lowered, thus making investment across borders easier. There
are risks in the changes in the value of the currency. This
means that companies find it risky to import or export outside
their currency zone and that profits could be lowered. Using
a unified form of currency eliminates this worry. It creates
a more risk free import and export area, which already relies
heavily on intra-European exports.
Another benefit of many countries using the euro is that it
eliminates the need for conversion fees. When a person or business
has the need to exchange currency, there is a fee involved.
Most financial institutions charge some sort of percentage
for conversion and while it is a relative small amount, it
adds up. Multiple changes add up all across Europe. Eliminating
these fees saves the economy in the long run.
When looking at the Forex and the way the euro performs, it
is also important to remember that using one form of currency
creates a deeper financial market. This means that the European
markets are much more liquid than in the past. There is more
competition with the euro not that it is more widely accepted
and used. The idea that it will created a deeper financial
market means it will affect they way the consumers spend the
currency all across the continent. This will in turn, lead
to increased amounts of money that is spent on the stock market.
Now that the euro has become one of the major currencies in
the world, trading for it and with it will increase on the
Forex. The Forex is usually dominated by the US dollar, but
the euro is making a strong stand. The use of this currency
all over the European countries is appealing in many ways and
it is widely accepted all over the world. Both businesses and
individuals benefit from the use of the euro in these countries
without the worry of having the exchange the money as much
as in the past.
# # # # # SolveYourProblem.com : 2007
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