Best Currencies to Trade in Nigeria

What are the best currency pairs to trade in Nigeria?

👉 In contrast to equities markets, currency markets allow traders to use a higher degree of leverage while imposing lower margin requirements.

👉 However, before you dive fully into the fast-paced world of foreign exchange (Forex), you will need to familiarize yourself with the currency pairings that are traded the most often.

👉 Here is a rundown of six of the most actively traded currency pairings in the foreign exchange market:

➡️ EUR/USD

➡️ USD/JPY

➡️ GBP/USD

➡️ USD/CHF

➡️ AUD/USD

➡️ USD/CAD

➡️ NZD/USD

EUR/USD

👉 This currency pair comprises the European Union (EU) and United States official currencies (USD). The USD is the quotation currency, and the forex pair reflects the number of USD required to acquire one Euro, the pair’s base currency. Traders refer to the EUR/USD exchange as “Euro trading.”

👉 The EUR/USD exchange rate is 1 euro for x dollars. For instance, if EUR/USD trades at $1.50, it signifies that it costs $1.5 to acquire one euro. The EUR/USD currency pair has become the most actively traded pair in the world, attributable to EUR/USD symbolizing the two biggest economies in the world.

👉 The EUR/USD exchange rate is impacted indirectly and directly by factors that affect the euro and/or US dollar’s value relative to one another as well as other currencies.

👉 Consequently, the difference in interest rates between the European Central Bank (ECB) and the Federal Reserve (Fed) has a substantial impact on the relative prices of these currencies.

👉 In contrast to a price graph for a stock, where the stated price corresponds directly to the stock’s price, the price shown on a price graph for a forex pair relates to the exchange rate between the two currencies.

👉 The orientation of a chart is thus decided by the base currency. However, it is essential to highlight that the pair’s base currency is fixed and always equals one unit.

👉 Consequently, the rate does not provide the reason for the strengthening and/or weakening. The EUR/USD exchange rate might increase if the euro rises, or the US dollar falls. Either of these circumstances increases the rate (price) and a corresponding rise in the price chart.

👉 The Euro to US Dollar exchange rate is exceptionally tight, resulting in reduced expenses for traders. Because of the vast number of transactions involving this pair, this market is very liquid.

👉 In the past, the EUR/USD market has seen extraordinary fluctuations throughout various periods, which is another reason why traders are attracted to this currency pair.

USD/JPY

👉 The USD/JPY currency ticker depicts the relationship between the US Dollar and the Japanese Yen. Dollar-Yen is the second most traded currency pair, after EUR/USD, and a gauge for the economic health of Asia and the globe.

👉 This pair is sometimes referred to as the Ninja due to the Japanese origins of the mythical warrior. Dollar to Yen is a member of the majors group and the second most active currency pair on the Forex market, after the EUR/USD.

👉 The United States dollar is the base currency in this pair, while the Japanese yen is the quote currency. This implies that if the USD/JPY exchange rate is 110, one dollar will cost 110 Japanese yen.

👉 The USD/JPY currency pair has always been appealing to all sorts of forex traders due to the intrinsic liquidity it provides throughout the day, and notably at “odd” Asian hours, assuring a liquid 24-hour market.

GBP/USD

👉 The British pound sterling and the United States dollar comprise this currency pair. The GBP/USD currency pair is colloquially known as “Cable,” named after the deep-sea cables used to transmit bid and ask quotes between London and New York.

👉 As with most other currency pairs, the strength of the GBP/USD pair depends on the overall health of both the British and American economies.

👉 If the British economy grows much faster than the American economy, the pound should rise against the dollar. If the American economy is doing better than the British economy, then the converse is true.

👉 The sign for the GBP/USD currency pair is 1 British pound for X US dollars. For example, if the pair is trading at 1.50, one British pound will cost $1.5 per unit.

👉 GBP/USD is one of the top five most traded currency pairs in the world. GBP/USD is a currency pair that is affected by factors that affect the value of the British pound and/or the US dollar relative to other currencies and each other.

👉 The total interest rate differential between the Bank of England (BoE) and the Federal Reserve will thus impact the relative prices of these currencies. GBP/USD is now one of the most valuable technical analysis forex pairs that can be traded.

👉 Due to its reactivity to key indications, most technical traders like trading this pair. Correlation is another reason why both novice and expert traders choose this combination.

USD/CHF

👉 USD/CHF is the abbreviation for the exchange rate between the US dollar and the Swiss franc. As of October 2019, the USD/CHF, sometimes known as the “Swissie,” is the sixth most traded forex pair on the foreign exchange market.

👉 The only European currency still in circulation today is the Swiss franc. Switzerland, a nation with a neutral stance in Europe, uses the Confoederatio Helvetica Franc, or simply CHF, as its currency.

👉 Due to its financial secrecy, Switzerland has remained a preferred location for keeping currency. Consequently, the Swiss Franc has strengthened significantly, putting pressure on the nation’s exporters.

👉 As the dollar is involved, USD/CHF is one of the most important currency pairings in the foreign exchange market. In addition, this currency pair’s spreads are less than those of minor and exotic currency pairings due to its substantial trading volume and liquidity.

👉 The US dollar is the base currency in the USD/CHF forex pair, while the Swiss franc is the quote currency. At any one time, the USD/CHF pair’s price indicates the number of Swiss francs required to exchange one US dollar for one franc.

AUD/USD

👉 The Australian dollar was proclaimed a “floating” currency in 1983. Numerous causes associated with factors such as geology, geography, government policy, and several others, endear it to novice and experienced traders alike.

👉 Metals, coal, diamonds, cattle, and wool are all extremely abundant in Australia, leading to it being one of the most resource-rich countries in the world.

👉 AUD/USD is one of the most popular currency pairs to trade. When traders engage in AUD/USD trading, it is sometimes referred to informally as “trading the Aussie.” The difference in interest rates between the Reserve Bank of Australia as well as the Federal Reserve will influence the value of a currency.

👉 AUD/USD may increase if, for instance, the Fed intervenes in open market activities to devalue the US currency. This is because of the Fed’s actions, which increase the supply of US dollars and reduce the price of the currency via bank circulation.

👉 As the Australian dollar appreciates against the US dollar, the value of the pair rises compared to the strengthening Australian dollar.

USD/CAD

👉 USD/CAD is the market symbol for the exchange rate between the US dollar (USD) and the Canadian dollar (CAD). This currency pair is considered “major” because it contains the US dollar, which is often recognized as the most successful and important currency in the world.

👉 Since more prominent currency pairs are the most often traded on the Forex market, they have greater daily trading volumes, tighter spreads, and are more liquid than minor or exotic currency pairs.

👉 Nigerian traders who have previously handled the USD/CAD currency pair will be aware of the term “Loonie trading.” This especially refers to the Canadian dollar coin with the image of its namesake bird.

👉 The USD/CAD currency pair is among the most liquid and actively traded on the foreign exchange market. The USD/CAD exchange rate is affected by factors that impact the value of the US dollar and/or the Canadian dollar relative to one another and other currencies.

👉 This currency pair is influenced by the difference in interest rates between the Federal Reserve (Fed) and the Bank of Canada (BoC).

👉 The value of the Canadian dollar is also significantly correlated with the cost of other commodities, particularly crude oil. Due to the dependency of Canada’s economy on oil, the price of oil dictates the condition of the economy and the value of the currency, hence CAD is considered a commodity currency.

NZD/USD

👉 New Zealand and its dollar currency are not among the largest in the world, but they have a major presence in the forex market. NZD/USD is one of the major pairs and it is also referred to as the “Kiwi.”

👉 New Zealand is a major provider of agricultural goods such as whole milk powder, as well as other fruits and meat. In terms of risk, the New Zealand dollar is seen similarly to the AUD/USD currency combination due to its perceived commodity character.

👉 Carry traders have profited from the NZD to USD’s exposure to the agricultural output and commodities markets, as well as New Zealand’s historically high interest rates.

👉 The exchange rate between the US Dollar and the New Zealand dollar can be influenced by the performance of the country’s export market. Increases in global dairy and agricultural prices may stimulate the economy, influencing the value of the currency. Furthermore, the tourist sector is a significant economic engine.