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G5 Currencies

Published by Jonathon Jachura

Reviewed by Bowen Khong, ACCA

The G5 currencies encompass those of France, the United Kingdom, Japan, Germany, and the United States

The currencies include the euro, the British Pound sterling, the United States dollar, the Swiss Franc, and the Japanese Yen.

These five nations will occasionally hold meetings to work towards cooperative efforts on specific international economic issues. Monetary authorities of each country hold summits when currency issues are in question. 

The G5 Currencies

The G5 countries make up the world’s leading industrial forces and are composed of the currencies of each of the five leading countries. 

The leaders of these five nations meet routinely to discuss economic cooperation and other financial matters. Additionally, each of these countries has central banks that meet as needed to discuss monetary matters. 

Here are the details of each currency within G5: 

The Euro (EUR)

One of the G5 currencies is the euro, which is the official currency of the European Union. Forex traders commonly favor the euro for its benefits, such as price stability and global economic influence. 

The European Union launched the euro as an accounting currency in 1999. In 2002, the euro became the official currency of 12 European states during the early formation of the European Union (EU). 

Today (in 2021), the euro is used as the official currency in nineteen EU countries.

The European Central Bank implemented the euro with the hope of developing a more stable European economy. It managed to do just that, with improvements in economic growth throughout Europe and increased integration among financial markets. 

British Pound Sterling (GBP)

The British pound, popular amongst forex traders and investors, gets its staunch support from Britain’s exports, including machinery, minerals, cars, precious metals, and pharmaceuticals.

Lower inflation rates also work well with the exchange rate of the British pound.

It currently serves as the official currency in several locations, including Great Britain, the British Antarctic Territory, the South Sandwich Islands, Tristan da Cunha, and the British Overseas Territories. 

The pound coin itself appeared as early as 1489, and pound notes followed a while later, in 1694. Once coin minting was optimized in 1660 and lettering was introduced, the more modern version of the British pound came about.  

In 1931, the United Kingdom removed the gold standard, which allowed the British pound to float freely in the market. This facilitated market factors deciding the currency’s value instead of pegging the currency to something tangible (gold). 

Although the euro took over the majority of the European Union member states in 2002, the United Kingdom declined and instead chose to keep the British pound as their national currency. Long live the Queen. 

The United States Dollar (USD)

When it comes to the foreign exchange market, the U.S. dollar holds a crucial role, as this currency holds the title of the world’s most essential reserve currency. 

The dollar makes up more than three-quarters of all foreign exchange, which means most trades are currencies that are exchanged to or from USD. 

The U.S. dollar is also considered the benchmark currency for the global market. This essentially translates to cheaper commodities when the dollar value dips low but skyrocketing when the dollar value is high. 

It is the official currency in sixteen countries. As of Q4 2020, the International Monetary Fund (IMF) reported that the total broad money of the United States dollar amounted to $23,302.05 trillion

Japanese Yen (JPY)

Japan is home to some of the most formidable and technologically advanced products, including automobiles, machinery, chemicals, processed foods, electronics, and textiles. 

As such, the Japanese yen is a popular currency within the international trading market given the miraculously low-interest rates that help support the yen’s value. 

Used only in Japan, the Japanese yen is the third most traded currency on the foreign exchange market. The IMF reported total broad money totaling JPY 1,516,800.00 trillion at the end of 2020.

The Meiji government officially instituted this form of currency in 1871 and was introduced gradually starting in July of the same year.

It is derived from the Spanish “pieces of eight” and replaced a complicated monetary system that had been around since the Edo period, which is based on the mon

Swiss Franc (CHF)

The Swiss Franc, which is the official currency in two countries (Switzerland and Liechtenstein), is a formidable currency due to the financial market’s stability, transparency, and regulation. 

The Switzerland economy is rated as the safest economy globally and is a safe haven. Its exports include precious metals, watches, machinery, chemicals, and agricultural products. 

The Federal Government of Switzerland became the official issuer of the Swiss Franc in 1848. They initially introduced the first Swiss Franc in 1850, with several different series of the Franc presented in the following years. 

Switzerland joined the Bretton Woods system in 1945 and pegged the Franc to the U.S. dollar at 4.375 Francs equaling 1 USD. Between the years 2003 and 2006, the Swiss Franc was stable against the euro. 

By 2008, it was valued higher than the USD. In 2010, Switzerland introduced the 9th series of the Franc. However, in 2011, the European Union deemed the Franc “a threat to the economy,” causing the Franc to plummet. 

Group Of Five

Not to be confused with the G5 currencies is the G5. 

The Group of Five, also known as G5, is composed of five nations that came together to play an active role in the evolution of the international order. As of the mid-2000s, these five countries include Brazil, India, China, South Africa, and Mexico. 

These five countries are the five largest emerging economies. National leaders from each nation will intermittently convene summits to discuss economic, political, and other international matters. 

These five countries were not officially recognized as the G5 and were not called such. For example, at the 2003 summit, they were known as the “G8+5.” 

By 2007, these five countries were officially considered the G5, but by this point had lost relevance as other groups became the primary focus, such as the G3 or G10. 

The term “G5” also previously referred to the group of nations that is now known as the G6. These countries included Germany, the United Kingdom, France, Spain, and Italy. However, the group underwent a name change, now known as G6, when Poland joined the group in 2006.

Jonathon Jachura
Jonathon Jachura
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