Most Volatile Forex Currency Pairs to Trade

As a result, any changes in the price of any of these markets will affect NZD’s value against the Japanese yen. We recommend that you seek independent financial advice and most volatile currency pairs ensure you fully understand the risks involved before trading. The table shows that today the most volatile Forex pairs are exotic, namely, USD/SEK, USD/TRY, and USD/BRL.

Of course, we won’t discourage you from trading the low liquidity currency pairs. However, our task is to warn inexperienced traders and newbies that the risk of such trading is higher than that of trading the classic currency pairs. One of them turns out to be “volatility,” a term that is thrown around a lot. Also, the most volatile currency pairs are highlighted in the list below. The most liquid currency pairs are EUR/USD, USD/JPY, GBP/USD, AUD/USD, and USD/CAD.

Differences in the two currencies

Most oil and natural gas-related news will, therefore, have a huge impact on the USD/MXN currency price. We feature a major currency, the USD/MXN pair our list of most volatile forex pairs to trade in 2023 because of its contradictory volume dynamics. Its price action tends to be relatively moderate in the morning – during market opening hours. The GBP/AUD currency pairs two of the world’s largest economies – Britain and Australia. They are some of the most traded currencies but also one of the most volatile fx pairs to trade today. And unlike most other fx pairs on this list, the two are closely related because they are part of the Commonwealth.

• So, when you “BUY” the currency pair, you are ideally selling the quote currency, which is the Japanese Yen and buying the base currency – which is the Canadian Dollar.
• The more positively two currencies are correlated to one another might lead to less volatility.
• 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.
• Major geopolitical activities in Europe can also have a substantial impact on the volatility of the pair.
• In addition, there are several other examples of emerging market currency pairs bulging or deflating this much over a short period throughout history.

However, such high volatility results from low liquidity, and trading the low liquidity currency pairs carries particular risks for a trader. Other major currency pairs, like EUR/USD, USD/JPY, GBP/USD and USD/CHF, are generally more liquid and less volatile as a result. That said, emerging market currency pairs, such as USD/ZAR, USD/TRY and USD/MXN, can clock some of the highest volatility readings.

Ready To Start Trading Forex?

As a beginner forex trader, you should know how to identify volatile currency pairs and drivers of volatility to safely trade volatile currency pairs. The currency pairs with the least changes in value tend to be the major currency pairs that are liquid and often involve larger, more developed economies. Exchange rates in these economies are more likely to be stable in value. This nourishes more trading volume and yields better price stability among the most liquid currency pairs. The previous years have been unusually volatile for currency traders. Price swings in major currencies like the EUR/USD make traders euphoric regarding the profit opportunities but simultaneously come with certain risks.

When trading these less volatile currency pairs, traders should consider trading spreads or entry orders to ensure a greater chance of a favourable entry. Low inflation, stable trade, stable governments, and predictable monetary policies are indicators of a currency that is more likely to be less volatile. Casually used among traders, the term “volatility” usually refers to the size and frequency of market swings. One of the reasons for their low volatility is a positive correlation between two currencies that often leads to less volatility. Both referred to as safe-haven currencies, the US dollar and the Swiss franc tend to move in the same direction against other currencies upon the same market conditions.

CAD/JPY

You should only trade in these products if you fully understand the risks involved and can afford to incur losses that will not adversely affect your lifestyle. The information on this website is intended for non Australian citizens and residents only. Please note, Australian residents cannot open an account with ACY Capital Australia LLC. The greater degree of movement in high-volatility currency pairs makes it difficult for traders to hold the position for an extended period. Due to this greater movement, position sizing is crucial when trading high-volatility currency pairs.

• Tensions between these two countries have risen ever since President Donald Trump won the 2016 presidential election.
• The currency pair hit all-time highs before the election and has sold off significantly in the following days.
• The American and Australian dollars respectively are the elements of the AUDUSD volatile currency pair.
• A wise Forex trader closes a long position in advance without waiting for the stop loss to trigger at the second candlestick.

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 US dollars for the rand. The powerful Australian extractive industry struggles because of a slowdown in the Chinese market.

EUR/JPY

There remains speculation about the duration of Erdogan’s tenure and the potential impact of a successor, if any, on the value of the lira on global currency markets. The CAD/JPY is the pair of https://g-markets.net/ the Canadian dollar and the Japanese yen. This currency pair is influenced by trade relations between Canada and Japan, as well as financial reports, balance of payments, and interest rates.

This rise came after sterling fell almost 7% throughout 2018, which reflected uncertainty surrounding the terms of the UK’s departure from the EU. Volatility in this pair could decrease if a withdrawal agreement is agreed, but so far there has been no sign of consensus. This is particularly true around any key policy announcements, or any crucial votes in the UK House of Commons. On the other hand, pairs with very low volatilities aren’t ideal either. A currency pair’s stability depends on the base and quoted currency pair’s stability.

Central banks, liquidity, economic policy, political unrest, natural disasters and weather events are just a few of the key drivers to volatility. The inverse relationship between the Australian dollar and the Japanese yen makes this pair highly volatile. The Australian dollar is a commodity currency, which means its value is highly influenced by the price and volume of Australia’s exports, especially minerals, metals, and agricultural products. According to Goldman Sachs and the Australian government’s commodity forecaster, the price of iron ore would stay relatively stable for the rest of 2022.

The Least Volatile Currency Pairs

Awareness of volatility can also help traders determine appropriate levels for stop loss and take profit limit orders. Furthermore, it is important to understand the key characteristics separating the most volatile currencies from currencies with low volatility readings. Traders should also know how to measure volatility and have an awareness of events that might create big changes in volatility. The list starts with the currency pair of the Australian Dollar against the Japanese Yen.

AUD/USD takes fourth place, with the Australian Dollar as a major commodity currency. The primary difference between high and low volatility pairs is that volatile pairs normally gain/lose more pips over a certain time period, thus they are riskier to trade. Moreover, frequent price moves are more likely to result in slippage. Trading pairs with low volatility may sound less risky but is an obstacle in the way to large profits.

What are the least volatile currency pairs?

The chart below gives an example of how volatile emerging market currencies can be, which shows USD/ZAR (US Dollar/South Africa Rand) exploding nearly 25% higher in just over a month’s time. There are several other examples of emerging market currency pairs swinging drastically like this throughout history. They are pairs that include one major currency and a currency from an emerging economy like ZAR/ USD and TRY/ GBP. Traders are cautious of trading exotic pairs due to uncertainty surrounding some emerging countries’ economies. Now that we have covered the most volatile pairs, let’s look at the least volatile currency pairs.