Euro

[Trajan]

It depends on your perspective. Currency trading is mostly done through the dollar. If a German trader wants to buy Yen and sell his Euros, he will typically buy dollars first and then use them to buy Yen. The Euro/Yen cross is quoted but is not as heavily traded as each currency is against the dollar.

 

[shellback]

Originally posted by Trajan
It depends on your perspective. Currency trading is mostly done through the dollar. If a German trader wants to buy Yen and sell his Euros, he will typically buy dollars first and then use them to buy Yen. The Euro/Yen cross is quoted but is not as heavily traded as each currency is against the dollar.

EUR/JPY is one of the major crosses. The volume might not be as high as EUR/USD or USD/JPY, but it is certainly traded regularly in the spot FX market. Why would this "German" pay two spreads when he can do it directly with one spread?

 

[Trajan]

It depends on how wide the two spreads are versus the one and how liquid the market is at executable prices. Figures:

Official figures show the US dollar on one side of 83% of spot foreign exchange transactions and in 95% of all deals in the swaps market.

The Euro remains the second most important currency in the foreign exchange market with 37% (40% in 1992).

The Japanese yen (24%) and the pound sterling (10%) are ranked third and fourth. The Swiss franc's share was 7% and both the Australian and Canadian dollars accounted for 3%.

It is where the liquidity is at. It's not that that Euro/Yen doesn't trade, it does, that's why I used the qualifier "typically". There would be a lot of factors going into whether you trade it through the dollar or directly.