Currency

A currency (from Middle English: curraunt, "in circulation", from Latin: currens, -entis), in the most specific use of the word, refers to money in any form when in use or circulation as a medium of exchange, especially circulating banknotes and coins.[1][2] A more general definition is that a currency is a system of money (monetary units) in common use, especially for people in a nation.[3] Under this definition, US dollars (US$), British pounds (£), Australian dollars (A$), European euros (€), Russian rubles (₽) and Indian Rupees (₹) are examples of currency. These various currencies are recognized as stores of value and are traded between nations in foreign exchange markets, which determine the relative values of the different currencies.[4] Currencies in this sense are defined by governments, and each type has limited boundaries of acceptance.

Other definitions of the term "currency" are discussed in their respective synonymous articles banknote, coin, and money. The latter definition, pertaining to the currency systems of nations, is the topic of this article. Currencies can be classified into two monetary systems: fiat money and commodity money, depending on what guarantees the currency's value (the economy at large vs. the government's physical metal reserves). Some currencies are legal tender in certain political jurisdictions. Others are simply traded for their economic value. Digital currency has arisen with the popularity of computers and the Internet.

History

Early currency

A print from 1845 shows cowry shells being used as money by an Arab trader
Cowry shells being used as money by an Arab trader.

Originally money was a form of receipt, representing grain stored in temple granaries in Sumer in ancient Mesopotamia and later in Ancient Egypt.

In this first stage of currency, metals were used as symbols to represent value stored in the form of commodities. This formed the basis of trade in the Fertile Crescent for over 1500 years. However, the collapse of the Near Eastern trading system pointed to a flaw: in an era where there was no place that was safe to store value, the value of a circulating medium could only be as sound as the forces that defended that store. A trade could only reach as far as the credibility of that military. By the late Bronze Age, however, a series of treaties had established safe passage for merchants around the Eastern Mediterranean, spreading from Minoan Crete and Mycenae in the northwest to Elam and Bahrain in the southeast. It is not known what was used as a currency for these exchanges, but it is thought that ox-hide shaped ingots of copper, produced in Cyprus, may have functioned as a currency.

It is thought that the increase in piracy and raiding associated with the Bronze Age collapse, possibly produced by the Peoples of the Sea, brought the trading system of oxhide ingots to an end. It was only the recovery of Phoenician trade in the 10th and 9th centuries BC that led to a return to prosperity, and the appearance of real coinage, possibly first in Anatolia with Croesus of Lydia and subsequently with the Greeks and Persians. In Africa, many forms of value store have been used, including beads, ingots, ivory, various forms of weapons, livestock, the manilla currency, and ochre and other earth oxides. The manilla rings of West Africa were one of the currencies used from the 15th century onwards to sell slaves. African currency is still notable for its variety, and in many places, various forms of barter still apply.

Coinage

These factors led to the metal itself being the store of value: first silver, then both silver and gold, and at one point also bronze. Now we have copper coins and other non-precious metals as coins. Metals were mined, weighed, and stamped into coins. This was to assure the individual accepting the coin that he was getting a certain known weight of precious metal. Coins could be counterfeited, but the existence of standard coins also created a new unit of account, which helped lead to banking. Archimedes' principle provided the next link: coins could now be easily tested for their fine weight of metal, and thus the value of a coin could be determined, even if it had been shaved, debased or otherwise tampered with (see Numismatics).

Most major economies using coinage had several tiers of coins of different values, made of copper, silver, and gold. Gold coins were the most valuable and were used for large purchases, payment of the military and backing of state activities. Units of account were often defined as the value of a particular type of gold coin. Silver coins were used for midsized transactions, and sometimes also defined a unit of account, while coins of copper or silver, or some mixture of them (see debasement), might be used for everyday transactions. This system had been used in ancient India since the time of the Mahajanapadas. The exact ratios between the values of the three metals varied greatly between different eras and places; for example, the opening of silver mines in the Harz mountains of central Europe made silver relatively less valuable, as did the flood of New World silver after the Spanish conquests. However, the rarity of gold consistently made it more valuable than silver, and likewise silver was consistently worth more than copper.

Paper money

In premodern China, the need for credit and for a medium of exchange that was less physically cumbersome than large numbers of copper coins led to the introduction of paper money, i.e. banknotes. Their introduction was a gradual process which lasted from the late Tang dynasty (618–907) into the Song dynasty (960–1279). It began as a means for merchants to exchange heavy coinage for receipts of deposit issued as promissory notes by wholesalers' shops. These notes were valid for temporary use in a small regional territory. In the 10th century, the Song dynasty government began to circulate these notes amongst the traders in its monopolized salt industry. The Song government granted several shops the right to issue banknotes, and in the early 12th century the government finally took over these shops to produce state-issued currency. Yet the banknotes issued were still only locally and temporarily valid: it was not until the mid 13th century that a standard and uniform government issue of paper money became an acceptable nationwide currency. The already widespread methods of woodblock printing and then Bi Sheng's movable type printing by the 11th century were the impetus for the mass production of paper money in premodern China.

Jiao zi
Song dynasty Jiaozi, the world's earliest paper money.

At around the same time in the medieval Islamic world, a vigorous monetary economy was created during the 7th–12th centuries on the basis of the expanding levels of circulation of a stable high-value currency (the dinar). Innovations introduced by Muslim economists, traders and merchants include the earliest uses of credit,[5] cheques, promissory notes,[6] savings accounts, transactional accounts, loaning, trusts, exchange rates, the transfer of credit and debt,[7] and banking institutions for loans and deposits.[7]

In Europe, paper money was first introduced on a regular basis in Sweden in 1661 (although Washington Irving records an earlier emergency use of it, by the Spanish in a siege during the Conquest of Granada). As Sweden was rich in copper, many copper coins were in circulation, but its relatively low value necessitated extraordinarily big coins, often weighing several kilograms.

The advantages of paper currency were numerous: it reduced the need to transport gold and silver, which was risky; it facilitated loans of gold or silver at interest, since the underlying specie (money in the form of gold or silver coins rather than notes) never left the possession of the lender until someone else redeemed the note; and it allowed a division of currency into credit and specie backed forms. It enabled the sale of stock in joint-stock companies and the redemption of those shares in a paper.

But there were also disadvantages. First, since a note has no intrinsic value, there was nothing to stop issuing authorities from printing more notes than they had specie to back them with. Second, because it increased the money supply, it increased inflationary pressures, a fact observed by David Hume in the 18th century. Thus paper money would often lead to an inflationary bubble, which could collapse if people began demanding hard money, causing the demand for paper notes to fall to zero. The printing of paper money was also associated with wars, and financing of wars, and therefore regarded as part of maintaining a standing army. For these reasons, paper currency was held in suspicion and hostility in Europe and America. It was also addictive since the speculative profits of trade and capital creation were quite large. Major nations established mints to print money and mint coins, and branches of their treasury to collect taxes and hold gold and silver stock.

At that time, both silver and gold were considered a legal tender and accepted by governments for taxes. However, the instability in the exchange rate between the two grew over the course of the 19th century, with the increases both in the supply of these metals, particularly silver, and in trade. The parallel use of both metals is called bimetallism, and the attempt to create a bimetallic standard where both gold and silver backed currency remained in circulation occupied the efforts of inflationists. Governments at this point could use currency as an instrument of policy, printing paper currency such as the United States greenback, to pay for military expenditures. They could also set the terms at which they would redeem notes for specie, by limiting the amount of purchase, or the minimum amount that could be redeemed.

By 1900, most of the industrializing nations were on some form of gold standard, with paper notes and silver coins constituting the circulating medium. Private banks and governments across the world followed Gresham's law: keeping the gold and silver they received but paying out in notes. This did not happen all around the world at the same time, but occurred sporadically, generally in times of war or financial crisis, beginning in the early 20th century and continuing across the world until the late 20th century, when the regime of floating fiat currencies came into force. One of the last countries to break away from the gold standard was the United States in 1971, an action known as the Nixon shock. No country has an enforceable gold standard or silver standard currency system.

Banknote era

A banknote (more commonly known as a bill in the United States and Canada) is a type of currency and commonly used as legal tender in many jurisdictions. Together with coins, banknotes make up the cash form of all money. Banknotes are mostly paper, but Australia's Commonwealth Scientific and Industrial Research Organisation developed a polymer currency in the 1980s; it went into circulation on the nation's bicentenary in 1988. Polymer banknotes had already been introduced in the Isle of Man in 1983. Now used in some 22 countries (over 40 if counting commemorative issues), polymer currency dramatically increases the life span of banknotes and reduces counterfeiting.

Modern currencies

Currency unit name
Name of currency units by country.
Strength of currencies
Strength of currencies relative to USD as of April 2016.
2002 currency exchange AIGA euro money
Currencies exchange logo
Most traded currencies by value
Currency distribution of global foreign exchange market turnover[8]
Rank Currency ISO 4217 code
(symbol)
% of daily trades
(bought or sold)
(April 2016)
1
United States dollar
USD (US$)
87.6%
2
Euro
EUR (€)
31.4%
3
Japanese yen
JPY (¥)
21.6%
4
Pound sterling
GBP (£)
12.8%
5
Australian dollar
AUD (A$)
6.9%
6
Canadian dollar
CAD (C$)
5.1%
7
Swiss franc
CHF (Fr)
4.8%
8
Renminbi
CNY (元)
4.0%
9
Swedish krona
SEK (kr)
2.2%
10
New Zealand dollar
NZD (NZ$)
2.1%
11
Mexican peso
MXN ($)
1.9%
12
Singapore dollar
SGD (S$)
1.8%
13
Hong Kong dollar
HKD (HK$)
1.7%
14
Norwegian krone
NOK (kr)
1.7%
15
South Korean won
KRW (₩)
1.7%
16
Turkish lira
TRY (₺)
1.4%
17
Russian ruble
RUB (₽)
1.1%
18
Indian rupee
INR (₹)
1.1%
19
Brazilian real
BRL (R$)
1.0%
20
South African rand
ZAR (R)
1.0%
21
Danish krone
DKK (kr)
0.8%
22
Polish złoty
PLN (zł)
0.7%
23
New Taiwan dollar
TWD (NT$)
0.6%
24
Thai baht
THB (฿)
0.4%
25
Malaysian ringgit
MYR (RM)
0.4%
26
Hungarian forint
HUF (Ft)
0.3%
27
Saudi riyal
SAR (﷼)
0.3%
28
Czech koruna
CZK (Kč)
0.3%
29
Israeli shekel
ILS (₪)
0.3%
30
Chilean peso
CLP (CLP$)
0.2%
31
Indonesian rupiah
IDR (Rp)
0.2%
32
Colombian peso
COP (COL$)
0.2%
33
Philippine peso
PHP (₱)
0.1%
34
Romanian leu
RON (L)
0.1%
35
Peruvian sol
PEN (S/)
0.1%
Other 2.1%
Total[9] 200.0%

The currency usage is based on the concept of lex monetae; that a sovereign state decides which currency it shall use. The International Organization for Standardization has introduced a system of three-letter codes (ISO 4217) to denote currency (as opposed to simple names or currency signs), in order to remove the confusion arising because there are dozens of currencies called the dollar and several called the franc. Even the "pound" is used in nearly a dozen different countries; most of these are tied to the Pound Sterling, while the remainder has varying values. In general, the three-letter code uses the ISO 3166-1 country code for the first two letters and the first letter of the name of the currency (D for dollar, for instance) as the third letter. United States currency, for instance, is globally referred to as USD.

The International Monetary Fund uses a different system when referring to national currencies.

Alternative currencies

Distinct from centrally controlled government-issued currencies, private decentralized trust networks support alternative currencies such as Bitcoin, Ethereum, Litecoin, Monero, Peercoin or Dogecoin, as well as branded currencies, for example 'obligation' based stores of value, such as quasi-regulated BarterCard, Loyalty Points (Credit Cards, Airlines) or Game-Credits (MMO games) that are based on reputation of commercial products, or highly regulated 'asset-backed' 'alternative currencies' such as mobile-money schemes like MPESA (called E-Money Issuance).[10]

The currency may be Internet-based and digital, for instance, bitcoin[11] is not tied to any specific country, or the IMF's SDR that is based on a basket of currencies (and assets held).

Control and production

In most cases, a central bank has a monopoly right to issue of coins and banknotes (fiat money) for its own area of circulation (a country or group of countries); it regulates the production of currency by banks (credit) through monetary policy.

An exchange rate is a price at which two currencies can be exchanged against each other. This is used for trade between the two currency zones. Exchange rates can be classified as either floating or fixed. In the former, day-to-day movements in exchange rates are determined by the market; in the latter, governments intervene in the market to buy or sell their currency to balance supply and demand at a static exchange rate.

In cases where a country has control of its own currency, that control is exercised either by a central bank or by a Ministry of Finance. The institution that has control of monetary policy is referred to as the monetary authority. Monetary authorities have varying degrees of autonomy from the governments that create them. A monetary authority is created and supported by its sponsoring government, so independence can be reduced by the legislative or executive authority that creates it.

Several countries can use the same name for their own separate currencies (for example, a dollar in Australia, Canada, and the United States). By contrast, several countries can also use the same currency (for example, the euro or the CFA franc), or one country can declare the currency of another country to be legal tender. For example, Panama and El Salvador have declared US currency to be legal tender, and from 1791 to 1857, Spanish silver coins were legal tender in the United States. At various times countries have either re-stamped foreign coins or used currency board issuing one note of currency for each note of a foreign government held, as Ecuador currently does.

Each currency typically has a main currency unit (the dollar, for example, or the euro) and a fractional unit, often defined as ​1100 of the main unit: 100 cents = 1 dollar, 100 centimes = 1 franc, 100 pence = 1 pound, although units of ​110 or ​11000 occasionally also occur. Some currencies do not have any smaller units at all, such as the Icelandic króna.

Mauritania and Madagascar are the only remaining countries that have theoretical fractional units not based on the decimal system; instead, the Mauritanian ouguiya is in theory divided into 5 khoums, while the Malagasy ariary is theoretically divided into 5 iraimbilanja. In these countries, words like dollar or pound "were simply names for given weights of gold."[12] Due to inflation khoums and iraimbilanja have in practice fallen into disuse. (See non-decimal currencies for other historic currencies with non-decimal divisions.)

Currency convertibility

Convertibility of a currency determines the ability of an individual, corporate or government to convert its local currency to another currency or vice versa with or without central bank/government intervention. Based on the above restrictions or free and readily conversion features, currencies are classified as:

Fully convertible 
When there are no restrictions or limitations on the amount of currency that can be traded on the international market, and the government does not artificially impose a fixed value or minimum value on the currency in international trade. The US dollar is an example of a fully convertible currency and, for this reason, US dollars are one of the major currencies traded in the foreign exchange market.
Partially convertible 
Central banks control international investments flowing in and out of the country, while most domestic trade transactions are handled without any special requirements, there are significant restrictions on international investing and special approval is often required in order to convert into other currencies. The Indian rupee and Renminbi are examples of a partially convertible currency.
Nonconvertible 
Neither participate in the international FOREX market nor allow conversion of these currencies by individuals or companies. As a result, these currencies are known as blocked currencies. e.g.: North Korean won and the Cuban peso.

Local currencies

In economics, a local currency is a currency not backed by a national government and intended to trade only in a small area. Advocates such as Jane Jacobs argue that this enables an economically depressed region to pull itself up, by giving the people living there a medium of exchange that they can use to exchange services and locally produced goods (in a broader sense, this is the original purpose of all money). Opponents of this concept argue that local currency creates a barrier which can interfere with economies of scale and comparative advantage and that in some cases they can serve as a means of tax evasion.

Local currencies can also come into being when there is economic turmoil involving the national currency. An example of this is the Argentinian economic crisis of 2002 in which IOUs issued by local governments quickly took on some of the characteristics of local currencies.

One of the best examples of a local currency is the original LETS currency, founded on Vancouver Island in the early 1980s. In 1982, the Canadian Central Bank’s lending rates ran up to 14% which drove chartered bank lending rates as high as 19%. The resulting currency and credit scarcity left island residents with few options other than to create a local currency.[14]

List of major world payment currencies

The following table are estimates of the 15 most frequently used currencies in world payments from 2012 to 2018 by SWIFT.[15][16][17][18][19][20]

15 Major Currencies in World Payments (in % of World)
Rank Currency January
2012
Currency January
2014
Currency January
2015
Currency February
2017
Currency October
2018
Currency January
2019
World 100.00% World 100.00% World 100.00% World 100.00% World 100.00% World 100.00%
1 European Union Euro 44.04% United States United States dollar 38.75% United States United States dollar 43.41% United States United States dollar 40.86% United States United States dollar 39.71% United States United States dollar 40.08%
2 United States United States dollar 29.73% European Union Euro 33.52% European Union Euro 28.75% European Union Euro 32.00% European Union Euro 34.24% European Union Euro 34.17%
3 United Kingdom Pound sterling 9.00% United Kingdom Pound sterling 9.37% United Kingdom Pound sterling 8.24% United Kingdom Pound sterling 7.41% United Kingdom Pound sterling 7.28% United Kingdom Pound sterling 7.07%
4 Japan Japanese yen 2.48% Japan Japanese yen 2.50% Japan Japanese yen 2.79% Japan Japanese yen 3.30% Japan Japanese yen 3.65% Japan Japanese yen 3.30%
5 Australia Australian dollar 2.08% Canada Canadian dollar 1.80% China Renminbi 2.06% Canada Canadian dollar 1.89% Canada Canadian dollar 1.79% China Renminbi 2.15%
6 Canada Canadian dollar 1.81% Australia Australian dollar 1.75% Canada Canadian dollar 1.91% China Renminbi 1.84% China Renminbi 1.70% Canada Canadian dollar 1.74%
7 Switzerland Swiss franc 1.36% China Renminbi 1.39% Switzerland Swiss franc 1.91% Switzerland Swiss franc 1.66% Australia Australian dollar 1.48% Hong Kong Hong Kong dollar 1.50%
8 Sweden Swedish krona 1.05% Switzerland Swiss franc 1.38% Australia Australian dollar 1.74% Australia Australian dollar 1.61% Hong Kong Hong Kong dollar 1.35% Australia Australian dollar 1.44%
9 Singapore Singapore dollar 1.03% Hong Kong Hong Kong dollar 1.09% Hong Kong Hong Kong dollar 1.28% Hong Kong Hong Kong dollar 1.30% Switzerland Swiss franc 1.23% Singapore Singapore dollar 1.02%
10 Hong Kong Hong Kong dollar 0.95% Thailand Thai baht 0.98% Thailand Thai baht 0.98% Thailand Thai baht 1.01% Singapore Singapore dollar 1.00% Thailand Thai baht 0.96%
11 Norway Norwegian krone 0.93% Sweden Swedish krona 0.97% Singapore Singapore dollar 0.89% Sweden Swedish krona 0.97% Thailand Thai baht 0.93% Switzerland Swiss franc 0.85%
12 Thailand Thai baht 0.82% Singapore Singapore dollar 0.88% Sweden Swedish krona 0.80% Singapore Singapore dollar 0.96% Sweden Swedish krona 0.78% Sweden Swedish krona 0.81%
13 Denmark Danish krone 0.54% Norway Norwegian krone 0.80% Norway Norwegian krone 0.68% Norway Norwegian krone 0.68% Norway Norwegian krone 0.70% Norway Norwegian krone 0.66%
14 Russia Russian ruble 0.52% Denmark Danish krone 0.60% Denmark Danish krone 0.56% Poland Polish złoty 0.51% Poland Polish złoty 0.54% Poland Polish złoty 0.54%
15 South Africa South African rand 0.48% Poland Polish złoty 0.58% Poland Polish złoty 0.55% South Africa South African rand 0.45% Malaysia Malaysian ringgit 0.46% Denmark Danish krone 0.46%

See also

Related concepts

Accounting units

Lists

References

  1. ^ "Currency". The Free Dictionary.
  2. ^ Bernstein, Peter (2008) [1965]. "4–5". A Primer on Money, Banking and Gold (3rd ed.). Hoboken, NJ: Wiley. ISBN 978-0-470-28758-3. OCLC 233484849.
  3. ^ "Currency". Investopedia.
  4. ^ "Guide to the Financial Markets" (PDF). The Economist.
  5. ^ Banaji, Jairus (2007). "Islam, the Mediterranean and the Rise of Capitalism". Historical Materialism. 15 (1): 47–74. doi:10.1163/156920607X171591. ISSN 1465-4466. OCLC 440360743. Archived from the original on May 23, 2009. Retrieved August 28, 2010.
  6. ^ Lopez, Robert Sabatino; Raymond, Irving Woodworth; Constable, Olivia Remie (2001) [1955]. Medieval trade in the Mediterranean world: Illustrative documents. Records of Western civilization.; Records of civilization, sources and studies, no. 52. New York: Columbia University Press. ISBN 978-0-231-12357-0. OCLC 466877309. Archived from the original on March 9, 2012.
  7. ^ a b Labib, Subhi Y. (March 1969). "Capitalism in Medieval Islam". The Journal of Economic History. 29 (1): 79–86. ISSN 0022-0507. JSTOR 2115499. OCLC 478662641.
  8. ^ "Triennial Central Bank Survey Foreign exchange turnover in April 2016" (PDF). Triennial Central Bank Survey. Basel, Switzerland: Bank for International Settlements. 11 December 2016. p. 7. Retrieved 22 March 2017.
  9. ^ The total sum is 200% because each currency trade always involves a currency pair; one currency is sold (e.g. US$) and another bought (€). Therefore each trade is counted twice, once under the sold currency ($) and once under the bought currency (€). The percentages above are the percent of trades involving that currency regardless of whether it is bought or sold, e.g. the U.S. Dollar is bought or sold in 87% of all trades, whereas the Euro is bought or sold 31% of the time.
  10. ^ TED Video: Kemp-Robertson, Paul (June 2013). "Bitcoin. Sweat. Tide. Meet the future of branded currency". TED (conference).Corresponding written article: "10 alternative currencies, from Bitcoin to BerkShares to sweat to laundry detergent". TED (conference). July 25, 2013. Archived from the original on July 25, 2013.
  11. ^ Hough, Jack. "The Currency That's Up 200,000 Percent". SmartMoney (The Wall Street Journal). Archived from the original on October 24, 2012. Retrieved December 14, 2012.
  12. ^ Turk, James; Rubino, John (2007) [2004]. The collapse of the dollar and how to profit from it: Make a fortune by investing in gold and other hard assets (Paperback ed.). New York: Doubleday. pp. 43 of 252. ISBN 978-0-385-51224-4. OCLC 192055959.
  13. ^ Linton, Michael; Bober, Jordan (November 7, 2012). "Opening Money". The Extraenvironmentalist (Interview). Interviewed by Seth Moser-Katz; Justin Ritchie. Retrieved December 29, 2016.
  14. ^ "Opening Money" (MP3). The Extraenvironmentalist (Podcast). Retrieved December 29, 2016.[13]
  15. ^ RMB breaks into the top ten most-used currencies for payments
  16. ^ Chinese Renminbi Overtakes the Swiss Franc as a World Payments Currency
  17. ^ RMB reaches record levels of payments activity between offshore centres
  18. ^ RMB role and share of international payments is declining CTMfile. April 5, 2017
  19. ^ RMB Tracker Monthly reporting and statistics on renminbi(RMB) progress towards becoming an international currency (PDF)
  20. ^ [1]RMB Tracker February 2019
  • Media related to Currency at Wikimedia Commons
  • Quotations related to Currency at Wikiquote
Australian dollar

The Australian dollar (sign: $; code: AUD) is the currency of Australia (including its external territories Christmas Island, Cocos (Keeling) Islands, and Norfolk Island), and of three independent Pacific Island states, specifically Kiribati, Nauru, and Tuvalu. It was introduced on 14 February 1966 when the pre-decimal Australian pound, with subunits of shillings and pence, was replaced by the new decimal currency, the Australian dollar.

Within Australia, it is almost always abbreviated with the dollar sign ($), with A$ or AU$ sometimes used to distinguish it from other dollar-denominated currencies. It is subdivided into 100 cents.

In 2016, the Australian dollar was the fifth most traded currency in world foreign exchange markets, accounting for 6.9% of the world's daily share (down from 8.6% in 2013) behind the United States dollar, the European Union's euro, the Japanese yen and the United Kingdom's pound sterling. The Australian dollar is popular with currency traders, because of the comparatively high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of Australia's economy and political system, and the prevailing view that the Australian dollar offers diversification benefits in a portfolio containing the major world currencies, especially because of its greater exposure to Asian economies and the commodities cycle.The Australian dollar was legal tender of Papua New Guinea until 1 January 1976, when the Papua New Guinean kina became the sole legal tender there.

Canadian dollar

The Canadian dollar (symbol: $; code: CAD; French: dollar canadien) is the currency of Canada. It is abbreviated with the dollar sign $, or sometimes Can$ or C$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents (¢).

Owing to the image of a loon on the one-dollar coin, the currency is sometimes referred to as the loonie by foreign exchange traders and analysts, as it is by Canadians in general, or huard in French.

Accounting for approximately 2% of all global reserves, the Canadian dollar is the fifth most held reserve currency in the world, behind the U.S. dollar, the euro, the yen and the pound sterling. The Canadian dollar is popular with central banks because of Canada's relative economic soundness, the Canadian government's strong sovereign position, and the stability of the country's legal and political systems.

Cryptocurrency

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency. Since the release of bitcoin, over 4,000 altcoins (alternative variants of bitcoin, or other cryptocurrencies) have been created.

Currency symbol

A currency symbol is a graphic symbol used as a shorthand for a currency's name, especially in reference to amounts of money.

Although several former currency symbols were rendered obsolete by the adoption of the euro, having a new and unique currency symbol – implementation of which requires the adoption of new Unicode and type formats – has now become a status symbol for international currencies. The European Commission considers the global recognition of the euro sign € part of its success. In 2009, India launched a public competition to replace the ₨ ligature it shared with neighbouring countries. It finalised its new currency symbol, ₹ (₹) on 15 July 2010. It is a blend of the Latin letter 'R' with the Devanagari letter 'र' (ra).

Digital currency

Digital currency (digital money, electronic money or electronic currency) is a type of currency available in digital form (in contrast to physical, such as banknotes and coins). It exhibits properties similar to physical currencies, but can allow for instantaneous transactions and borderless transfer-of-ownership. Examples include virtual currencies and cryptocurrencies and central bank issued money accounted for in a computer database (including digital base money). Like traditional money, these currencies may be used to buy physical goods and services, but may also be restricted to certain communities such as for use inside an online game or social network.Digital currency is a money balance recorded electronically on a stored-value card or other devices. Another form of electronic money is network money, allowing the transfer of value on computer networks, particularly the Internet. Electronic money is also a claim on a private bank or other financial institution such as bank deposits.Digital money can either be centralized, where there is a central point of control over the money supply, or decentralized, where the control over the money supply can come from various sources.

Euro

The euro (sign: €; code: EUR) is the official currency of 19 of the 28 member states of the European Union. This group of states is known as the eurozone or euro area, and counts about 343 million citizens as of 2019. The euro is the second largest and second most traded currency in the foreign exchange market after the United States dollar. The euro is subdivided into 100 cents.

The currency is also used officially by the institutions of the European Union, by four European microstates that are not EU members, as well as unilaterally by Montenegro and Kosovo. Outside Europe, a number of special territories of EU members also use the euro as their currency. Additionally, 240 million people worldwide as of 2018 use currencies pegged to the euro.The euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar.

As of August 2018, with more than €1.2 trillion in circulation, the euro has one of the highest combined values of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.The name euro was officially adopted on 16 December 1995 in Madrid. The euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1 (US$1.1743). Physical euro coins and banknotes entered into circulation on 1 January 2002, making it the day-to-day operating currency of its original members, and by March 2002 it had completely replaced the former currencies. While the euro dropped subsequently to US$0.83 within two years (26 October 2000), it has traded above the U.S. dollar since the end of 2002, peaking at US$1.60 on 18 July 2008. In late 2009, the euro became immersed in the European sovereign-debt crisis, which led to the creation of the European Financial Stability Facility as well as other reforms aimed at stabilising and strengthening the currency.

Exchange rate

In finance, an exchange rate is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in relation to another currency. For example, an interbank exchange rate of 114 Japanese yen to the United States dollar means that ¥114 will be exchanged for each US$1 or that US$1 will be exchanged for each ¥114. In this case it is said that the price of a dollar in relation to yen is ¥114, or equivalently that the price of a yen in relation to dollars is $1/114.

Exchange rates are determined in the foreign exchange market, which is open to a wide range of different types of buyers and sellers, and where currency trading is continuous: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday. The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.

In the retail currency exchange market, different buying and selling rates will be quoted by money dealers. Most trades are to or from the local currency. The buying rate is the rate at which money dealers will buy foreign currency, and the selling rate is the rate at which they will sell that currency. The quoted rates will incorporate an allowance for a dealer's margin (or profit) in trading, or else the margin may be recovered in the form of a commission or in some other way. Different rates may also be quoted for cash, a documentary form or electronically. The higher rate on documentary transactions has been justified as compensating for the additional time and cost of clearing the document. On the other hand, cash is available for resale immediately, but brings security, storage, and transportation costs, and the cost of tying up capital in a stock of banknotes ( bills )

Foreign exchange market

The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines the foreign exchange rate. It includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the Credit market.The main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. Since currencies are always traded in pairs, the foreign exchange market does not set a currency's absolute value but rather determines its relative value by setting the market price of one currency if paid for with another. Ex: US$1 is worth X CAD, or CHF, or JPY, etc.

The foreign exchange market works through financial institutions and operates on several levels. Behind the scenes, banks turn to a smaller number of financial firms known as "dealers", who are involved in large quantities of foreign exchange trading. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the "interbank market" (although a few insurance companies and other kinds of financial firms are involved). Trades between foreign exchange dealers can be very large, involving hundreds of millions of dollars. Because of the sovereignty issue when involving two currencies, Forex has little (if any) supervisory entity regulating its actions.

The foreign exchange market assists international trade and investments by enabling currency conversion. For example, it permits a business in the United States to import goods from European Union member states, especially Eurozone members, and pay Euros, even though its income is in United States dollars. It also supports direct speculation and evaluation relative to the value of currencies and the carry trade speculation, based on the differential interest rate between two currencies.In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying with some quantity of another currency.

The modern foreign exchange market began forming during the 1970s. This followed three decades of government restrictions on foreign exchange transactions under the Bretton Woods system of monetary management, which set out the rules for commercial and financial relations among the world's major industrial states after World War II. Countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed per the Bretton Woods system.

The foreign exchange market is unique because of the following characteristics:

its huge trading volume, representing the largest asset class in the world leading to high liquidity;

its geographical dispersion;

its continuous operation: 24 hours a day except for weekends, i.e., trading from 22:00 GMT on Sunday (Sydney) until 22:00 GMT Friday (New York);

the variety of factors that affect exchange rates;

the low margins of relative profit compared with other markets of fixed income; and

the use of leverage to enhance profit and loss margins and with respect to account size.As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks.

According to the Bank for International Settlements, the preliminary global results from the 2016 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity show that trading in foreign exchange markets averaged $5.09 trillion per day in April 2016. This is down from $5.4 trillion in April 2013 but up from $4.0 trillion in April 2010. Measured by value, foreign exchange swaps were traded more than any other instrument in April 2016, at $2.4 trillion per day, followed by spot trading at $1.7 trillion.The $5.09 trillion break-down is as follows:

$1.654 trillion in spot transactions

$700 billion in outright forwards

$2.383 trillion in foreign exchange swaps

$96 billion currency swaps

$254 billion in options and other products

ISO 4217

ISO 4217 is a standard first published by International Organization for Standardization in 1978, which delineates currency designators, country codes (alpha and numeric), and references to minor units in three tables:

Table A.1 – Current currency & funds code list

Table A.2 – Current funds codes

Table A.3 – List of codes for historic denominations of currencies & fundsThe tables, history and ongoing discussion are maintained by SIX Interbank Clearing on behalf of ISO and the Swiss Association for Standardization.The ISO 4217 code list is used in banking and business globally. In many countries the ISO codes for the more common currencies are so well known publicly that exchange rates published in newspapers or posted in banks use only these to delineate the currencies, instead of translated currency names or ambiguous currency symbols. ISO 4217 codes are used on airline tickets and international train tickets to remove any ambiguity about the price.

Indian rupee

The Indian rupee (sign: ₹; code: INR) is the official currency of India. The rupee is subdivided into 100 paise (singular paisa), though as of 2018, coins of denomination of 50 paise or half rupee is the lowest value in use. The issuance of the currency is controlled by the Reserve Bank of India. The Reserve Bank manages currency in India and derives its role in currency management on the basis of the Reserve Bank of India Act, 1934.

In 2012, a new rupee symbol '₹', was officially adopted. It was designed by D. Udaya Kumar. It was derived from the combination of the Devanagari consonant "र" (ra) and the Latin capital letter "R" without its vertical bar (similar to the R rotunda). The parallel lines at the top (with white space between them) are said to make an allusion to the tricolour Indian flag, and also depict an equality sign that symbolises the nation's desire to reduce economic disparity. The first series of coins with the new rupee symbol started in circulation on 8 July 2011. Before this India used to use Rs for plural and Re to depict one rupee.

On 8 November 2016 the Government of India announced the demonetisation of ₹500 and ₹1000 banknotes with effect from midnight of the same day, making these notes invalid. A newly redesigned series of ₹500 banknote, in addition to a new denomination of ₹2000 banknote is in circulation since 10 November 2016. ₹1000 has been suspended.On 25 August 2017, a new denomination of ₹200 banknote was added to Indian currency to fill the gap of notes due to high demand for this note after demonetisation.In July 2018, the Reserve Bank of India released the ₹100 banknote.

Japanese yen

The yen (Japanese: 円, Hepburn: en, symbol: ¥; code: JPY; also abbreviated as JP¥) is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro, and the pound sterling.

The concept of the yen was a component of the Meiji government's modernization program of Japan's economy; which postulated the pursuit of a uniform currency throughout the country modeled after the European decimal currency system.

Before the Meiji Restoration, Japan's feudal fiefs all issued their own money, hansatsu, in an array of incompatible denominations. The New Currency Act of 1871 did away with these and established the yen, which was defined as 1.5 g (0.048 troy ounces) of gold, or 24.26 g (0.780 troy ounces) of silver, as the new decimal currency. The former han (fiefs) became prefectures and their mints private chartered banks, which initially retained the right to print money. To bring an end to this situation the Bank of Japan was founded in 1882 and given a monopoly on controlling the money supply.Following World War II the yen lost much of its prewar value. To stabilize the Japanese economy the exchange rate of the yen was fixed at ¥360 per $1 as part of the Bretton Woods system. When that system was abandoned in 1971, the yen became undervalued and was allowed to float. The yen had appreciated to a peak of ¥271 per $1 in 1973, then underwent periods of depreciation and appreciation due to the 1973 oil crisis, arriving at a value of ¥227 per $1 by 1980.

Since 1973, the Japanese government has maintained a policy of currency intervention, and the yen is therefore under a "dirty float" regime. This intervention continues to this day. The Japanese government focuses on a competitive export market, and tries to ensure a low yen value through a trade surplus. The Plaza Accord of 1985 temporarily changed this situation from its average of ¥239 per US$1 in 1985 to ¥128 in 1988 and led to a peak value of ¥80 against the U.S. dollar in 1995, effectively increasing the value of Japan’s GDP to almost that of the United States. Since that time, however, the yen has greatly decreased in value. The Bank of Japan maintains a policy of zero to near-zero interest rates and the Japanese government has previously had a strict anti-inflation policy.

Large denominations of United States currency

Large denominations of United States currency greater than $100 were circulated by the United States Treasury until 1969. Since then, U.S. dollar banknotes have only been issued in seven denominations: $1, $2, $5, $10, $20, $50, and $100.

New Zealand dollar

The New Zealand dollar (sign: $; code: NZD, also abbreviated NZ$) (Māori: Tāra o Aotearoa) is the official currency and legal tender of New Zealand, the Cook Islands, Niue, the Ross Dependency, Tokelau, and a British territory, the Pitcairn Islands. Within New Zealand, it is almost always abbreviated with the dollar sign ($), with "NZ$" sometimes used to distinguish it from other dollar-denominated currencies. In the context of currency trading, it is often informally called the "Kiwi" or "Kiwi dollar", since New Zealand is commonly associated with the indigenous bird and the one-dollar coin depicts a kiwi.

Introduced in 1967, the dollar is subdivided into 100 cents. Altogether there are ten denominations—five coins and five banknotes—with the smallest being the 10-cent coin. Formerly there were lower denominations, but those were discontinued due to inflation and production costs.

The New Zealand dollar is consistently one of the 10 most traded currencies in the world, being approximately 2.0% of global foreign exchange market daily turnover in 2013.

Norwegian krone

The krone [ˈkruːnə] (sign: kr; code: NOK), plural kroner, is the currency of Norway and its dependent territories. It is subdivided into 100 øre, which have existed only electronically since 2012. The name translates into English as crown.

The krone was the thirteenth most traded currency in the world by value in April 2010, down three positions from 2007.

Numismatics

Numismatics is the study or collection of currency, including coins, tokens, paper money and related objects. While numismatists are often characterised as students or collectors of coins, the discipline also includes the broader study of money and other payment media used to resolve debts and the exchange of goods. Early money used by people is referred to as "Odd and Curious", but the use of other goods in barter exchange is excluded, even where used as a circulating currency (e.g., cigarettes in prison). The Kyrgyz people used horses as the principal currency unit and gave small change in lambskins; the lambskins may be suitable for numismatic study, but the horses are not. Many objects have been used for centuries, such as cowry shells, precious metals, cocoa beans, large stones and gems.

Today, most transactions take place by a form of payment with either inherent, standardized, or credit value. Numismatic value is the value in excess of the monetary value conferred by law, which is known as the collector value.Economic and historical studies of money's use and development are an integral part of the numismatists' study of money's physical embodiment.

Pound sterling

The pound sterling (symbol: £; ISO code: GBP), commonly known as the pound and less commonly referred to as sterling, is the official currency of the United Kingdom, Jersey, Guernsey, the Isle of Man, South Georgia and the South Sandwich Islands, the British Antarctic Territory, and Tristan da Cunha. It is subdivided into 100 pence (singular: penny, abbreviated: p). A number of nations that do not use sterling also have currencies called the pound.

Sterling is the third most-traded currency in the foreign exchange market, after the United States dollar, and the euro. Together with those two currencies and the Chinese yuan, it forms the basket of currencies which calculate the value of IMF special drawing rights. Sterling is also the third most-held reserve currency in global reserves (about 4%).The British Crown dependencies of Guernsey, Jersey and the Isle of Man produce their own local issues of sterling (the Guernsey pound, the Jersey pound and the Manx pound) which are considered fully equivalent to UK sterling in their respective regions. The pound sterling is also used in Gibraltar (alongside the Gibraltar pound), the Falkland Islands (alongside the Falkland Islands pound), Saint Helena and Ascension Island in Saint Helena, Ascension and Tristan da Cunha (alongside the Saint Helena pound). The Bank of England is the central bank for the pound sterling, issuing its own coins and banknotes, and regulating issuance of banknotes by private banks in Scotland and Northern Ireland. Banknotes issued by other jurisdictions are not regulated by the Bank of England; local governments use Bank of England notes as backing for local issuance by allowing them to be exchanged 1:1 at face value.

Renminbi

The renminbi (Ab.: RMB; simplified Chinese: 人民币; traditional Chinese: 人民幣; pinyin: rénmínbì; literally: 'people's currency'; sign: 元/¥; code: CNY) is the official currency of the People's Republic of China. The yuan (Chinese: 元; pinyin: yuán) is the basic unit of the renminbi, but is also used to refer to the Chinese currency generally, especially in international contexts where "Chinese yuan" is widely used to refer to the renminbi. The distinction between the terms renminbi and yuan is similar to that between sterling and pound, which respectively refer to the British currency and its primary unit. One yuan is subdivided into 10 jiao (Chinese: 角; pinyin: jiǎo), and a jiao in turn is subdivided into 10 fen (Chinese: 分; pinyin: fēn). The renminbi is issued by the People's Bank of China, the monetary authority of China.Until 2005, the value of the renminbi was pegged to the US dollar. As China pursued its transition from central planning to a market economy, and increased its participation in foreign trade, the renminbi was devalued to increase the competitiveness of Chinese industry. It has previously been claimed that the renminbi's official exchange rate was undervalued by as much as 37.5% against its purchasing power parity. More recently, however, appreciation actions by the Chinese government, as well as quantitative easing measures taken by the American Federal Reserve and other major central banks, have caused the renminbi to be within as little as 8% of its equilibrium value by the second half of 2012. Since 2006, the renminbi exchange rate has been allowed to float in a narrow margin around a fixed base rate determined with reference to a basket of world currencies. The Chinese government has announced that it will gradually increase the flexibility of the exchange rate. As a result of the rapid internationalization of the renminbi, it became the world's 8th most traded currency in 2013, and 5th by 2015.On 1 October 2018, the RMB became the first emerging market currency to be included in the IMF's special drawing rights basket, the basket of currencies used by the IMF (reserve currency).

Singapore dollar

The Singapore dollar (sign: S$; code: SGD) is the official currency of Singapore. It is divided into 100 cents. It is normally abbreviated with the dollar sign $, or S$ to distinguish it from other dollar-denominated currencies. The Monetary Authority of Singapore issues the banknotes and coins of the Singapore dollar.

As of 2016, the Singapore dollar is the twelfth-most traded currency in the world by value. Apart from its use in Singapore, the Singapore dollar is also accepted as customary tender in Brunei according to the Currency Interchangeability Agreement between the Monetary Authority of Singapore and the Autoriti Monetari Brunei Darussalam (Monetary Authority of Brunei Darussalam). Likewise, the Brunei dollar is also customarily accepted in Singapore.

United States dollar

The United States dollar (sign: $; code: USD; also abbreviated US$ and referred to as the dollar, U.S. dollar, or American dollar) is the official currency of the United States and its territories per the United States Constitution since 1792. In practice, the dollar is divided into 100 smaller cent (¢) units, but is occasionally divided into 1000 mills (₥) for accounting. The circulating paper money consists of Federal Reserve Notes that are denominated in United States dollars (12 U.S.C. § 418).

Since the suspension in 1971 of convertibility of paper U.S. currency into any precious metal, the U.S. dollar is, de facto, fiat money. As it is the most used in international transactions, the U.S. dollar is the world's primary reserve currency. Several countries use it as their official currency, and in many others it is the de facto currency. Besides the United States, it is also used as the sole currency in two British Overseas Territories in the Caribbean: the British Virgin Islands and Turks and Caicos Islands. A few countries use the Federal Reserve Notes for paper money, while still minting their own coins, or also accept U.S. dollar coins (such as the Sacagawea or presidential dollar). As of June 27, 2018, there are approximately $1.67 trillion in circulation, of which $1.62 trillion is in Federal Reserve notes (the remaining $50 billion is in the form of coins).

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