Every country or nation has a different flag, a national symbol, language, currency, etc. These differences have been incorporated to create certain distinctions between these countries. The currency of a nation is its money, which is in the form of paper, coins or bank notes. These different currencies have a unique 3 digit code, which distinguishes them from other currencies. This code has been set according to ISO 4217 standard. The first two characters in the code are set as per ISO 3166-1 standard and the last digit is a derivative of the name of the currency. The currencies are used for international trade and transactions and are exchanged according to the predominant exchange rate. These currencies and their codes are very important for international trade as they set a standard for the trade. For example, if India is to trade with Canada, then it would be essential to know both the currency codes, so that the trade takes place according to the prevailing exchange rate between the Indian Rupee and the Canadian Dollar and there is minimum discrepancy. US Dollar, Euro, Pound Sterling, and Yen are the major international currencies.
Distinctive features of International Currencies
- Some countries have same name for their national currency. For example, ‘Dollar’ is the currency of United States Of America, Australia, Canada, etc. Though the names might be same, the codes of these currencies are entirely different.
- There are several currencies, which can be used by many countries. For example, Euro is used in 16 of the 37 countries in Europe.
- One country can use the currency of another country as a method of payment. It can be used as a legal tender or for payment of debts.
- Every international currency has a main currency unit. The main unit is usually divided into a fraction to create smaller units of currency. For example, 1 Rupee=100 Paisa.
- Some currencies do not have their distinct codes as they are not independent currencies. For example, Cook Island dollar, Jersey Pound etc.
It is important to know the different currencies and their codes as they are very helpful in undertaking trade activities, making transactions and payments etc.