Top 6 Most Volatile Currency Pairs

Some traders prefer trading exotic pairs because they have high volatility rates, which means that they can return higher gains. However, they are riskier because they include economies that are unstable and inconsistent. For example, about 5 years ago, USD/JPY was significantly inferior to EUR/USD, which was the leader of this ranking. At the time of writing, EUR/USD is only in 5th place among the most volatile currency pairs.

Some investors prefer highly volatile currency pairs because of their potential for high rewards. Still, these rewards bring an increased level of risk, so investors should reduce position sizes when trading volatile currency pairs to retain FX currency protection. Trading volatile currency pairs offers lucrative opportunities for profit, but it also comes with increased risk. Successful traders develop comprehensive strategies that consider current volatility levels, implement effective risk management, and utilize appropriate indicators. Forex traders must be careful of deviations in any currency pairs they are trading and all other currency pairs and correlations for effective risk management. Positive or negative correlations of currency pairs give the traders an overview and a clear picture of the direction they should be trading and avoiding.

  • CAD/CHF, EUR/CHF, AUD/CHF, and CHF/JPY are the less volatile Forex pairs among the cross rates.
  • My advice would be to trade currency pairs with a good volatility balance.
  • Whenever a trader starts trading, he trades by speculating on a currency to get stronger or even weaker than the other, and if it achieves what the trader speculates or the goal, a profit is made.
  • For example, the presidential elections in the US, and the business ties with China can cause changes in its value.
  • Forecasting minor currency pairs is complicated by the lack of fundamental information in open sources, even if these are emerging markets currencies.
  • Highly-volatile currencies tend to change price more often than those with low volatility.

While not definitive, using charts and indicators will help you formulate your strategy and choose when to trade. Each line on the chart represents the activity of a specific currency pair, i.e., its volatility in pips during the day. The pairs were selected to better visually demonstrate the influence of a region on the “tradability” of a pair. As well as being a trader, Milan writes daily analysis for the Axi community, using his extensive knowledge of financial markets to provide unique insights and commentary.

And it is not surprising since the economies of the US and the European Union are the largest ones. USD/JPY comes second with the Japanese Yen being one of the most heavily traded currencies and a major safe-haven currency too. The same report documented that the Japanese Yen was the third most traded currency, being involved in 16.8% of foreign exchange trades.

List of volatile forex pairs

This was exacerbated by the election of Jair Bolsonaro – a far-right populist – to the presidency in January 2019. On January , a day after Bolsonaro was sworn in as president, the real dropped 2.63% against the dollar, followed by 1.08% the following day and 1.07% the day after that. Experience the exhilaration of crude oil surges driven by shrinking stockpiles, solid US data, and Fed hawkishness.

In the dynamic world of Forex trading, major currency pairs like EUR/USD, USD/CHF, and EUR/GBP are considered the bastions of stability and liquidity. These currency pairs belong to the most developed economies globally, offering a secure trading environment and attracting significant trading volume. As a result, they tend to exhibit lower volatility compared to their more adventurous counterparts. While lower volatility implies less risk, it also means potentially lower rewards for traders seeking high-profit opportunities. Volatile currency pairs in Forex trading are the subject of keen interest for traders seeking potential opportunities in a dynamic market.

  • This is the reason why USD/CHF is one of the least volatile currency pairs.
  • Positive correlation means that two currencies move in the same direction, while negative correlation implies they move in opposite directions.
  • This pair enjoys high volatility thanks to the inverse relationship between the Australian dollar and Japanese yen.
  • The resulting percentage of standard deviation represents the volatility price, or how wide the price is fluctuating around the average market price.

The most volatile currency pairs can sometimes be hard to determine since volatility can impact different currencies at all different times. The most volatile currency pairs can sometimes be hard to determine since volatility can impact different currencies at different times. Currency pair volatility is a key aspect of Forex trading, denoting how much a currency might move relative to its average over a given period.

The US Dollar (USD) and the Swiss Franc (CHF) are both considered safe-haven currencies. During periods of market uncertainty or risk aversion, investors flock to safe-haven assets, leading to a rise in the value of both the USD and CHF. As a result, the USD/CHF pair tends to show lower volatility compared to other currency pairs. So, in the end, we can conclude that the forex market is full of irregularities.

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If you decide to trade, say, USD/SEK or GBP/NZD, your analysis may not work as effectively as, for example, when trading EUR/USD. This calculation tells the volatility price or the range at which the market price is changing. Note that you need to determine the timeline to calculate the volatility. The USD is highly affected by political and economic situations around the world.

Therefore, an influx of large amounts of liquidity because of the large participant trading these pairs they aren’t volatile; more predictable. Six of the westernfx in the forex market will be listed below. Of course, we won’t discourage you from trading the low liquidity currency pairs.

Most volatile currency pairs summed up

Learn everything you need to know about forex trading and how it works in this guide. Canada is one of the largest economies in the world and a major oil exporter. The price of oil has therefore a large impact on the direction of the Canadian Dollar.

Both the US Dollar and the Japanese Yen are traditionally seen as safe havens, so the price swings can be limited, depending on the market environment. This can change when interest rates are rising in the United States while remaining agea forex broker review low in Japan, as the USD/JPY would then become a popular carry trade. Adding to this, Japan is a top importer of oil, which means that as the price of oil increases, the cost of buying Canadian dollars with yen also tends to increase.

Here we will talk about the most volatile currency pairs in the Foreign Exchange (Forex) market in 2023.

The South Korea won appeared after the division of the Korean peninsula into two separate states following World War II. If the price of gold rises, it is likely that the US dollar will also weaken against the ZAR. This is beneficial to South African exporters, and this also leads to a decline in the cost of buying kvb forex US dollars for the rand. The second issue a trader can confront when trading the unpredictable money related instruments is a wide spread (extra trading costs). This is on the grounds that the brain research of the market conduct in its most fluid structure makes up the foundation of specialized examination.

The trade may not begin with a significant profit like a call, but it will defend against a loss. When one country’s currency is weaker than another country’s currency, it can buy less of the other country’s currency. It could be challenging for an investor to keep up with exchange rate movements, but this metric changes how much investment in international markets will return.

The chart uses the Bollinger Bands and Standard Deviation indicators. At the first candlestick with an abnormally large body, the channel expands, its borders are broken, and the standard deviation grows. A wise Forex trader closes a long position in advance without waiting for the stop loss to trigger at the second candlestick.

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