The ISO 4217 is the international norm that establishes the standardized codes of the currencies of the different countries of the world so that they are used and recognized internationally.
In other words, these codes are used so that all the currencies that circulate in the different countries of the world and are used as currencies, are recognized uniformly in the world market.
Each currency is represented by a specific code and is represented by an alphabetic code or represented by means of letters. As well as, by a numerical code, which is clearly represented by numbers.
In addition, each code is made up of three elements. The alphabetic code is made up of three letters. The first two letters refer to the country of origin that the coin represents and the third letter to the name of the coin.
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Whereas, the numerical code is made up of three digits. This numerical symbology is very useful for the use of computerized systems. Also, when the currency is used in countries that do not handle symbols or Latin characters.
How can these ISO 4217 codes be applied?
For example, if we consider the alphabetic code. The first two letters are applied based on the ISO 3166 standard and should represent the country that uses that currency. The last letter is the name of the coin. Let’s look at the following cases:
- North American dollar its code is USD: The letters US indicate that the currency is from the United States and the D is the name of the dollar currency.
- Japanese yen its code is JPY: The letters JP indicate that the currency is from Japan and the Y is the name of the Yen currency.
- Costa Rican Colon its code is CRC: The letters CR indicate that the coin is from Costa Rica and the C is the name of the coin Colón.
- Boliviano its code is BOB: The letters BO indicate that the currency is from Bolivia and the B is the name of the Boliviano currency.
What if the currency is a metal?
Of course, it is common that on some occasions the currency used in international transactions is a metal. For that reason, ISO 4217 also establishes standardized codes for the metals used.
On the other hand, to identify metals, the code is first composed of a letter X and then the chemical identification of each metal is placed. The coded metals are:
- Gold and its code is XAU.
- Silver and its code is XAG.
- Palladium and its code is XPD.
- Platinum and your code is XPT.
It is important to clarify that, because it is used in the coding of metals, it cannot be used initially to identify the currencies of the countries. However, it can be used when referring to operations where Special Drawing Rights are used and when there are no monetary transactions.
- Special drawing rights are used for XTS testing purposes.
- There are no XXX monetary transactions.
What does the numerical code in ISO 4217 represent?
On the other hand, the numerical code is a number made up of three digits. The code is applied based on the ISO 3166-1 standard. This code is used especially by the Internet Assigned Numbers Authority (IANA). Generally, these codes are used in computerized systems and relate it to the code of the country that uses and issues the currency.
For example, in the case of the US dollar, it is assigned the numerical code 840, which is the code that represents the country of the United States.
What is the usefulness of the ISO 4217 standard?
Indeed, the ISO 4217 standard was designed by the International Organization for Standardization (ISO). The standardization of currencies worldwide is very useful. Because, standardization favors any type of financial or commercial transaction that is carried out within the environment of the international economy. Above all, now that we live in a globalized world.
Therefore, the standardization of currencies through codes is used in the banking, finance and international business sectors in general. Especially when it comes to establishing exchange rates within the foreign exchange market of the different currencies. In this way, confusion can be avoided when financial and commercial transactions are carried out internationally.
How are these ISO 4217 codes used in the foreign exchange market?
Fundamentally, the codes of the ISO 4217 standard facilitate the process of quoting and comparing the prices of the currencies that are traded in the foreign exchange market.
Generally, it is used to compare two currencies. The reference currency is called the base currency and is compared with a second currency or against currency.
What it is about determining is knowing how much second currency or counter currency is needed to buy a base currency. For this purpose, standardized currency codes work efficiently.
Let’s take an example, if you had the currency of the dollar as a base and we wanted to know how many quetzales we need to buy it. Using the codes it would be represented like this:
USD/GTQ = 1 USD/7.70 GTQ
This means that to buy a dollar you need 7.70 quetzales.
In the list below you can see currency pairs widely used in international markets:
- EUR / USD – Euro / US dollar.
- GBP/USD – British Pound/US Dollar.
- USD/JPY – US Dollar/Japanese Yen
In conclusion, it can be said that the ISO 4217 standard standardizes the currency codes that are used in the world market. This favors and simplifies all commercial and financial transactions in the field of international business. Since, it allows having a uniform nomenclature for all those who participate in the foreign exchange market or in the financial markets in the world.