Importance of International Currencies and Their Codes

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The currency of a nation is its currency in the form of paper money, coins, banknotes, etc. International currencies, represented by their codes, play a vital role in international trade and are generally traded at prevailing rates.

Currencies vary according to their exchange rate regime. Floating currencies are market driven and the value of the currency is determined by the supply and demand model, while fixed currencies have their exchange rates set and maintained by the government. The US dollar, the euro, the pound sterling and the yen are some of the major international currencies prevalent in today's world trade.

International currencies are identified by their unique 3-digit codes. These codes are defined in accordance with ISO 4217. Currency codes are used in business, bank, international airline and train tickets to avoid any ambiguity regarding the price. The first two characters of the code are the country code according to ISO 3166-1, which is also used for national domains on the Internet, and the last digit of the currency code is usually derived from the name of the currency. For example, the currency code for the United States dollar is USD, a combination of the United States, which is the country code for the United States and D, which is derived from the dollar.

There are however few international currencies which are not part of ISO 4217 due to their non-independent nature and being a variant of other currencies. Some of them are the Alderney pound, the Cook Island dollar, the Jersey pound, etc.

Some interesting facts about international currencies:

• Various countries can have the same name for their national currency. Ex: "Dollar" is the currency of the United Nations, Canada, Australia, etc.

• Many countries can use the same currency. Ex: the euro is the official currency of 16 of the 27 countries of the European Union.

• A country can use the currency of another country as its legal currency, a payment for the settlement of a debt.

• Each international currency has a main currency unit, namely 1 and a fractional currency generally at 1/100. Ex: 100 cents = 1 dollar.

• Few currencies exist without smaller units, namely the Icelandic krona.

To make international payments, it is convenient to know international currencies and their codes.


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