Importance of international currencies and their codes
A nation’s currency is its money, either in the form of paper money, coins, notes, etc. International currencies, represented by their codes, play a vital role in international trade and are usually exchanged at prevailing rates.
Currencies vary according to their exchange regime. Floating currencies are governed by the market and the value of the currency is determined by the supply-demand model, while fixed currencies have an exchange rate determined and maintained by the government. The US Dollar, Euro, Pound Sterling and Yen are a few of the major international currencies prevalent in today’s world trade.
International currencies are identified by their unique 3-digit codes. These codes are set according to the ISO 4217 standard. Currency codes are used in business, banking, international air and train tickets to avoid any ambiguity regarding the price. The first two characters in 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 in the currency code is usually derived from the name of the currency. For example, the currency code for the US dollar is USD, a combination of US, which is the country code for the United States, and D, derived from dollar.
However, there are several international currencies that are not part of ISO 4217 due to their non-standalone nature and are variants of other currencies. Some of them are Alderney Pound, Cook Island Dollar, Jersey Pound, etc.
Some interesting facts about international currencies:
• Different countries can have the same name for their national currency. Example: “dollar” is the currency of the United Nations, Canada, Australia, etc.
• Many countries can use the same currency. Example: the euro is the official currency of 16 of the 27 countries in the European Union.
• A country can use another country’s currency as legal tender, payment to settle a debt.
• Every international currency has a base currency unit, namely 1, and a fractional currency, usually 1/100. Example: 100 cents = 1 dollar.
• There are several currencies without smaller units, namely the Icelandic Krona.
To make international payments, it is convenient to know the international currencies and their codes.
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