What is the largest US currency

These are the 5 most important currencies in the world

There are over 160 official currencies in the world, but not all of them have the same stability and importance. Some stand out and are the major currencies in the world. Cash reserves are stored in them, transactions are made, cash payments are made and other currencies are also linked to them.

A selection shows which five currencies are the most important worldwide and what significance they have beyond their function as means of payment within their country.

1. US dollars

The most important currency in the world is the US dollar. It is considered the reserve currency and some economists even refer to it as the world currency. At the time of the Bretton Woods system, the US dollar was the anchor currency, linked to the commodity gold.

Even if the Bretton Woods system was abandoned, the US dollar retained its importance. In 2014, 44.64% of all transactions worldwide were paid in US dollars. The trend is slowly declining, for example the Chinese renminbi is on the rise. In addition, two thirds of all currency reserves in the world are held in US dollars.

Many other currencies are pegged to the US dollar, such as the Cuban CUC, the Venezuelan bolivar (even if this does not always work in practice), the Omani rial and the Saudi ryal in Saudi Arabia. In Panama and El Salvador, the US dollar is even the official national currency, in other countries such as Cambodia, Vietnam or Kenya it is accepted as a means of payment.

2 euros

In 2014, 28.3% of all payments were made in euros - around 338 million people live in the euro zone alone and use this currency every day. Some countries outside the EU also use the euro, such as Andorra, Saint-Barthélemy and San Marino. Montenegro and Kosovo also use the euro as a means of payment, although there is no formal agreement with these countries.

As with the US dollar, some countries have pegged their own currencies to the euro, including the island nation of Cape Verde, Bosnia and Herzegovina, Lithuania and Bulgaria. Around 175 million people worldwide pay with a currency linked to the euro. In addition, after the US dollar, the euro is another important currency for money reserves.

3. British pound

4.4% of all currency reserves are deposited in British pounds; before the Bretton Woods Agreement, the British pound was even the most important reserve currency in the world for a long time. The fact that the British pound is still so important today is due, among other things, to the international financial center of London, which is one of the largest in the world.

7.92% of all transactions worldwide are processed in British pounds, with pounds being used in England, Scotland, Wales, Northern Ireland as well as on the Isle of Man and the Channel Islands. Whether London will maintain its importance as a financial center will be seen after Great Britain's final exit from the EU, as the importance of the currency is closely linked to London's importance in the world.

4. Japanese yen

The Japanese yen is also one of the most important currencies in the world. It is the reserve currency of the Asia-Pacific region and, like the US dollar and the euro, is used by many countries as a reserve currency. In 2014, 2.69% of all payments worldwide were processed in yen; in Japan alone, around 127 million people use it every day.

The yen was introduced in 1871 on the European model. After the Second World War it was pegged to the US dollar as part of the Bretton Woods Agreement and was released for the free currency market after the agreement was abandoned in 1973.

5. Chinese renminbi

China has overtaken the United States as the world's largest economic power and the People's Republic's currency, the Chinese renminbi, is also on the rise. Experts believe that the renminbi could be one of the three most important currencies in the world in a few years - the International Monetary Fund included the currency, also known as the yuan, in the top 5 world currencies in 2016.

The European Central Bank already converted half a billion US dollars in cash reserves into the Chinese renminbi in the summer of 2017, which reflects the global importance of this currency. As early as 2016, the currency was number 5 among the most traded currencies in the world. This increases the global importance of China even further.

Dollar and euro - development, exchange rates & tips for successful investment strategies A dollar-euro parity has been under discussion since 2015, but with Trump it is getting closer. It is not clear whether it will be a turning point. > read more


© Verlag für die Deutsche Wirtschaft AG, all rights reserved