Currency: Definition, History, and Global List

What Is Currency?

Currency is a standardized medium of exchange designed to facilitate the transfer of goods and services. It primarily takes the form of money, issued by governments or groups of nations (e.g., the euro). Central banks typically manage currency issuance under legal monopoly, though private institutions may also play a role in some economies.

Key features:

• Legal tender: Recognized by law for settling debts.
• Symbols and codes: Standardized identifiers (e.g., USD, EUR) under ISO 4217.
• Subunits: Most currencies divide into cents or similar fractions (e.g., 100 cents = 1 dollar).

Historical Evolution

1. Pre-Standardization: Early trade relied on barter or weighed metal values (e.g., gold, silver).
2. Coinage: Introduced to simplify transactions, with stamped values ensuring trust.
3. Paper Money: Emerged as claims on metal reserves (e.g., gold-backed dollars).
4. Fiat Systems: Modern currencies derive value from government decree, not physical commodities.

Milestones:

• 1694: First banknotes issued by the Bank of England.
• 20th Century: Transition from the gold standard to fiat systems globally.

Global Currencies by Region

Americas

• North America: USD (United States), CAD (Canada), MXN (Mexico).
• Caribbean: XCD (Eastern Caribbean dollar), BSD (Bahamas).
• South America: BRL (Brazilian real), ARS (Argentine peso).

Europe

• Eurozone: EUR (19 EU countries + non-EU adopters like Monaco).
• Non-Euro: GBP (UK), CHF (Switzerland), SEK (Sweden).

Asia

• East Asia: CNY (China), JPY (Japan), KRW (South Korea).
• South Asia: INR (India), PKR (Pakistan).
• Middle East: AED (UAE), SAR (Saudi Arabia).

Africa

• North Africa: EGP (Egypt), DZD (Algeria).
• Sub-Saharan: ZAR (South Africa), NGN (Nigeria), XOF (West African CFA franc).

Oceania

• AUD (Australia), NZD (New Zealand), XPF (CFP franc).

Key Terms

• ISO 4217: Standard for currency codes (e.g., USD = US dollar).
• Foreign Exchange (FX): Trading currencies globally.
• Reserve Currency: Held by central banks (e.g., USD, EUR).

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FAQ

Q: What is fiat currency?
A: Money declared legal tender by governments but not backed by physical commodities.

Q: Why do currencies fluctuate in value?
A: Due to economic factors like inflation, interest rates, and political stability.

Q: What is the most traded currency?
A: The US dollar (USD) dominates global FX markets.