Share This Article
The G10 currencies are a group of selected significant currencies used in international markets. The group’s name originated from a meeting of finance ministers of the G10 nations on September 10, 1975. The Bank for International Settlements in Basel, Switzerland, created the group. The grouping of the 10 of these currencies was done to reflect better as how the global financial markets of the 1970s and 1980s were structured.
At the time, the G10 currencies were the US dollar, Swiss franc, Japanese yen, German mark, British pound sterling, Belgian franc, Swedish krona, Dutch guilder, and French franc. Over the years, additional G10 coins got extra and removed.
The G10 currencies are:
- US dollar (USD)
- euro (EUR)
- British Pound (GBP)
- Japanese yen (JPY)
- Australian dollar (AUD)
- New Zealand dollar (NZD)
- The Canadian dollar (CAD)
- Swiss Franc (CHF)
- Norwegian Krone (NOK)
- Swedish Krona (SEK)
The G10 currencies are the most widely used currencies in the international marketing and, consequently, are the most liquid currency markets. They are also very stable and predictable, allowing investors to invest with less risk in these markets. Furthermore, these currencies are known for their high liquidity and depth of demand, so you don’t have to worry about being unable to withdraw your investment or trade your G10 currency pairs if needed.
Factors effecting value of G10 Currencies
Several factors influence the value and exchange rates of the G10 currencies.:
Economic factors
Economic factors have the most significant influence on the value of the G10 currencies. Strong economies generally make investors more confident in the currency, which increases weight. When a country’s economy is in a recession, there is usually a decline in currency values. Economic factors influencing these currencies include:
- Interest rates
- inflation rates
- wages
- Unemployment
- trade deficits
- Balance of trade
Political Factors
Political factors also influence the value of the G10 currencies. So, in the same way, economic factors play a role, and political factors can trigger confidence or concern among investors, affecting the cost of G10 currency pairs. Political factors include:
- Economic sanctions
- military conflicts
- Military Expenses
- Trust in the Government
- Trust in politicians
- Changes in government leadership
G10 Currency Pairs
Each of the G10 group currencies trades heavily against most others, with few exceptions. Primarily, these currencies are used as reserve currencies, except the Canadian dollar and the Australian dollar. Within the G10, you will find that most currencies are strongly inversely related. The exception to this rule is the US dollar and the euro, the world’s most significant and second-largest reserve currencies.
Some of the major G10 currency pairs that traders use include:
USD/EUR – The US dollar against the euro
USD/JPY – The US dollar against the Japanese yen
GBP/CHF: the British pound against the Swiss franc
GBP/USD: the British pound against the US dollar
EUR/JPY – The euro against the Japanese yen
EUR/GBP – The euro against the British pound
CAD/JPY – The Canadian dollar against the Japanese yen
CAD/CHF – The Canadian dollar against the Swiss franc
CAD/EUR – The Canadian dollar against the euro
AUD/JPY – The Australian dollar against the Japanese yen
AUD/NZD – The Australian dollar against the New Zealand dollar
AUD/CAD – The Australian dollar against the Canadian dollar
NZD/JPY – The New Zealand dollar against the Japanese yen
NZD/CAD – The New Zealand dollar against the Canadian dollar
NZD/CHF – The New Zealand dollar against the Swiss franc
SEK/CHF – The Swedish krona against the Swiss franc
Norwegian Krone (NOK)/CHF – The Norwegian krone against the Swiss franc
G10 Currencies vs. Non-G10 Currencies
Consequently, the G10 currencies make up most of the world’s foreign exchange reserves. Therefore, these currencies are a benchmark for the value of other currencies. For example, the US dollar has been the benchmark for many currencies, including the Chinese yuan and also the Mexican peso.
For many countries, being removed from the G10 currencies can be perceived as a downgrade of their status. However, when new coins are added to these currencies, it can be seen as an upgrade to their quality and a sign of their strengthening and growth as a financial market. Although, it provides a new way for the country to participate in world trade and financial markets.
Basically, when a country is added to the G10 list of major currencies, it can significantly impact the value of the money, which in turn can affect the country’s economy. Therefore, to earn the respect and trust of other international market participants, the government must display a strong economy, a stable and well-managed business environment, and a stable banking system.
The Future of the G10 Currencies
As the world becomes more globalized, the growing importance of the G10 currencies is likely to continue. This is because these currencies are the most traded in the international market and also the most liquid. Therefore, as long as the these currencies remain the most traded currencies globally, their importance in the global economy will likely continue.
Furthermore, the G10 currencies are also the most stable and predictable. As a result, there is one less worry about being unable to cash out your investment or trade your G10 currency pairs if needed, compared to less liquid and less stable currencies. This stability is one of the reasons why these currencies are such a commonly that trades commodity in financial markets.
These currencies also have a long history of trading on the markets and being a standard base currency for many of the world’s leading financial institutions.
The Future of the G10 vs. Cryptocurrency
Undoubtedly, the major currencies in the G10 currency group will unlikely replace soon. However, as with any currency, the value of these currencies will fluctuate depending on political, economic, and social factors.
Therefore, the end of the US dollar as the world’s reserve currency will likely spell the end of these currencies. Alternative currencies, such as Special Drawing Rights, or SDRs, have been proposed in the past. However, the SDR has never been put into practice and is also not likely to replace these currencies soon.
Conclusion
Eventually, as the global economy continues to change and evolve, so will the G10 currencies. Hence, given that the G10 currencies are the most traded in the world and are the most popular among investors and also traders, it is safe to say that the future for these currencies looks bright. Moreover, since these currencies are accepted by almost every country globally, moreover, they have the most significant potential for growth and expansion.