Currency refers to printed money and coins (also known as fiat currency). It also refers to the specific unit of exchange of a nation or group of nations (i.e. the Euro).

Currency as Money

Currency is the primary means of payment for the purchase of goods and services. Currencies used by ancient civilizations included salt, cocoa, and gold dust. Today, currency consists of printed money, coins, and electronic money (debit cards). Without currency, it is nearly impossible to purchase items. Although you can buy goods and pay for services through credit, the amount owed to the creditor needs to be paid off using money. Barter of goods and services is also an option. The majority of businesses, however, do not accept barter as payment.

Currency as a Country’s Unit of Exchange

The currency of a nation can be either floating or fixed currency. A floating currency’s value fluctuates depending on the economy. Fixed or pegged currencies have values set by the government.

Due to the fluctuation in exchange rates of floating currencies, a kind of trading where people buy and sell currencies has emerged. Currency traders gain a profit by buying currencies when their value is low and selling them when it is high. This activity requires a good knowledge of the current market as well as continuous monitoring of actual currency fluctuations.