Currency of a nation is its money either in the form of paper money, coins, bank notes etc. International currencies, represented by their codes, play a vital role in international trade and usually are exchanged as per the prevailing rates.
Currencies vary depending on their exchange rate regime. Floating currencies are market driven and the worth of the currency is determined by the supply-demand model, whereas fixed currencies have their exchange rate set and maintained by government. US Dollar, Euro, Pound Sterling, and Yen are few of the major international currencies prevalent in current world trade.
International currencies are identified by their unique 3 digit codes. These codes are set as per ISO 4217 standard. Currency codes are used in business, banking, international airline and train tickets to avoid any ambiguity in relation to the price. The first two characters in the code are the country code as per 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 instance, currency code of United States Dollar is USD, a combination of US, which is the country code of United States and D, derived from Dollar.
There are, however, few international currencies which do not form a part of ISO 4217 owing to their non-independent nature and being a variant of other currencies. A few of them are Alderney pound, Cook island dollar, Jersey pound etc.
Few interesting facts about international currencies:
• Various countries can have the same name for their national currency. Ex: “Dollar” is the currency of United Nations, Canada, Australia etc.
• Many countries can use the same currency. Ex: Euro is the official currency of 16 of the 27 countries in the European Union.
• A country can use the currency of another country as legal tender, a payment for settlement of a debt.
• Each international currency has a main currency unit viz., 1 and a fractional currency usually at 1/100. Ex: 100 Cents = 1 Dollar.
• Few currencies exist without any smaller units viz., Icelandic krona.
To make international payments it is handy to know international currencies and their codes.