Who really controls the forex market? Is it the central banks or the private investors? Is the international exchange market truly free and open to everyone? It seems that the answer to these questions is no.
It seems that some say there are no individuals or institutions that really own the world’s largest, most profitable currency, the US Dollar. While they may be right, there are only some very few countries which account for over 90% of the overall forex trade volume. So, which currency pair is currently the most profitable in the forex?
According to the BIS (Bank for International Settlements) triennial study of 2020, the world’s largest currency traded markets were: the United States Dollar, Euro, Japanese Yen, Swiss Franc, Canadian Dollar, British Pound, Swiss Franc, Australian Dollar and the Chinese Yuan. In order to get a clear picture on who controls the forex market, it would be important to look at the economic policies of each of these markets. Do they adhere to open-trade policies that benefit the global economy as a whole?
Who Controls The Forex Market?
Of the four major currencies mentioned above, the US Dollar is the most popular and most traded with. With its low level of risk, it has become the base currency for investors all around the world. And since it can always be used for other purposes, it remains the currency of choice for many foreign investors. Its popularity is not restricted to only the global economy. In fact, some people say it is a blessing in disguise. With the American dollar tied up with the values of the other three, one of the major advantages of the US dollar is that it can be used as a means of exchange in different countries.
However, not every country is able to peg its currency to the US dollar. And there are times when they would not want to use the currency of the United States if the dollar was more stable. The Japanese Yen, for example, has been the primary reserve currency in Japan for many years. The Canadian dollar has always been used as a back up currency. When the Canadian dollar has lost its value compared to the U.S. dollar, they still have an option to use the USD as a backup.
Forex is a highly complicated market that can be controlled by some individuals or institutions while others have complete control of the market. Either way, it is still a great thing that we can trust our government to protect our currency from the vagaries of the global economy.