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13 Things About Currency You May Not Have Known
There are some essential facts about currency you need to know especially when it comes to foreign exchange. Possessing knowledge about these things will help you in removing ambiguity you may likely experience when dealing with foreign currency. You will be taken on a journey on facts about currencies around the world and fact you need to know about foreign exchange currency trade.
Tracking Your Currency
You probably just said, you are kidding me, right? No. I am serious. You are aware of tracking devices when they get lost such as phones and other gadgets but not money. The fact is that some currencies can be tracked as well.
For example, if your US dollar gets lost or you have just been duped during exchange, you do not have to bother too much.
First Currency in the World
The first currency that was used was developed among the Chinese people during the Tang Dynasty (A.D. 618-907). The currency was paper bill. The money stood as an exchange notes or form of privately issued bills of credit.
It was after 500 years and above of adoption in China that the Europe started to embrace this civilization in the 17th century. The rest of the world could not see the importance of the paper bill until after another century or two centuries of its adoption in Europe.
At this time, financial crisis had struck China deeply. However, in early stage of paper bill, growth in economy was witnessed by the Chinese before the paper bill value plummeted and triggered soaring of the inflation.
Consequently, the Chinese decided in 1455 to eliminate the use of paper bill and it was done for many centuries before another evolution of its adoption. Also, the term 'cash' was firstly used to describe the type of round bronze coins that possessed square holes commonly used in the same Tang Dynasty, known as 'kai-yuans.'
Rates of Currencies
Different currencies have different values. Therefore, there is what is known as foreign exchange rate, otherwise known as currency rate. It is the value of a country's currency when compared to another country's currency. The normal terminologies used in describing the two currencies are foreign currency and domestic currency, otherwise known as counter currency and base currency, respectively.
For example, if the rate for exchanging USD currency to Australian dollar (AUD) currency is 1.40, what this means is that, to get a US dollar in exchange for AUD, a sum of 1.40 AUD must be provided. It is very paramount to note that the first currency listed (USD) represents a unit of that currency and the exchange rate signifies amount of the second currency (AUD) to be given to acquire or purchase a unit of the first currency which is USD.
Location of Currency Market (Foreign Exchange)
Foreign exchange market does not necessarily involve physical exchange like stock market, it is an over-the-counter (OTC) market. The trading activities is negotiated and done directly between the two parties involved mostly using an electronic medium.
Some of the mediums for OTC market are WhatsApp messaging, Facebook messaging, telephone call, Instagram messaging, email and other proprietary electronic messaging/trading systems.
The foreign exchange market trading volume has participants such as central banks, commercial banks, hedge funds, international corporations, investment management firms, investors and retail foreign exchange brokers etc can be considered as the largest market in the universe.
Banks Do Not Give Real-Time Rates on Currency Exchange
The practice commonly adopted by banks and online remittance service providers is to give mark-up price for currency exchange. This means, your currency will not be exchange at the market price a trader will get it. However, not all online service providers adopt the same method but most of them. Banks on the other hand seem not to have any other means they use in doing their business.
The act is not illegal for your information and it is seen as the profit for doing business. I bet you also will not do business without aiming for profit. Let me explain better to you, if the USD/AUD price is 1.50, which means to buy a USD you must have 1.50 AUD. The bank will offer you a USD for 1.60 AUD instead. The difference between the exchange rate of the bank (1.60) and the market exchange rate (1.50) which is 0.10 is the profit of the bank for doing business with you.
Currency Loses Value
No matter how strong the money is, it wears out and loses value with time. As money loses value you tend to use it before it loses more value. Thereby, lifespan of a bill becomes shorter. You cannot keep the money forever. A paper bill can lasts for at least 21 months while coin may stay for up to 7 years. However, due to inflation, they will both lose values and that is what you do not want. So you cannot keep money forever.
How Currency Gets Dirty
Laundering of paper bills makes money dirty due to filthy stuff used in doing so. It has been reported that most paper bills are also contaminated with drug and substances like cocaine and meth. A coke-sullied hand of many drug traffickers are used for passing bills and some even uses it to sniff by rolling it into straws. Other factors causing dirtiness to currency are personal unkempt nature of money users and dirty safes as well as factory dusts and chemicals.
The Most Liquid Currencies in the World
To understand this better, you might need to study currency trade. The activities in the foreign exchange will acquaint you with knowing which currency is considered most liquid. There are seven most liquid currencies and in them will most foreign exchange dealers deal in.
Currencies are exchanged in pairs and these are the pairs generally used: EUR/USD (euro/dollar); USD/JPY (dollar/Japanese yen); GBP/USD (British pound/dollar); USD/CHF (dollar/Swiss franc); AUD/USD (Australian dollar/dollar); USD/CAD (dollar/Canadian dollar); and NZD/USD (New Zealand dollar/dollar). They are subject to various pairs too which makes them have 18 pairs.
Every Currency has an Associated Interest
You might be wondering what that means. Do not worry, that is why I want to explain to you. There is an interest associated with every currency. These interest rates are short-term and they are set by the central banks of every country for their currency. That is to say, the Federal Reserve set interest rate for the United States, the Central Bank of Nigeria for Nigeria, the Bank of Japan set for Japan, and the Bank of England set for the Great Britain.
Jargons for Currencies
There are so many jargons used to call some currency names you probably do not know. Let me enlighten you on some. The nicknames for Great Britain pounds are cable, sterling, pound; the US dollar is called greenback, buck; the Swiss franc is referred to as swissie; the Australian dollar is nicknamed as Aussie; the New Zealand dollar is called Kiwi; while the Canadian dollar is usually referred to as loonie or the little dollar.
The Elizabethan Currency
The Queen Elizabeth II's portrait has been used by more than 33 countries around the world to grace their currencies. Countries other than England like Australia, Trinidad and Tobago, Malta and Fiji, Zimbabwe, Canada have used her portrait on their currency.
Bigger Currencies are Difficult to see
I bet a few people have seen a 10,000 USD bill before. I heard you saying it doesn't exist. Oh no, it does exist. This is not just about dollars but about every other currency, bigger currencies are primarily used for bank transfer payment.
The Largest Currency
What we mean by largest currency is the currency with largest size of a legal paper sheet. To remove ambiguity, as far as 1934, a 100,000 USD was produced and it is still considered as the largest denomination ever printed. However, the world's largest single banknote is the 100,000-peso note developed by the Philippines government in 1998. It was used to mark their centenary year of independence after Spanish rule. Not everyone has access to the note, it was offered only to collectors, so they purchase it for 180,000 pesos, or about $3,700, obviously not everyone can afford that limited-edition of the bank note.
There are so many hiding facts about currency you probably still do not know. However, nobody is an island of knowledge. With the above knowledge, I pledge you have certainly upgraded. In fact, it is not knowing everything that matters, even though it is not possible, but what matters is knowing what you should know. You will continue to learn more about currency and its trading as long as you stick to this link. To learn more check other articles.