Top 6 Most Volatile Currency Pairs

most volatile currency pairs

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  • Trade balance influences the USD/KRW exchange rate, and if Korea has a trade surplus with the US, the KRW experiences greater demand.
  • The majority of this volatility comes from speculation around short term events.
  • Low inflation, stable trade, stable governments, and predictable monetary policies are indicators of a currency that is more likely to be less volatile.
  • Exotics are currency pairs that include one or two currencies of emerging markets, e.g., USD/MXN, USD/ZAR, USD/TRY, etc.
  • AxiTrader is not a financial adviser and all services are provided on an execution only basis.

Trading volatile currency pairs is potentially profitable, but also tricky. As a beginner forex trader, you should know how to identify volatile currency pairs and drivers of volatility to safely trade volatile currency pairs. Liquidity is the ability of an asset to be quickly bought or sold with a minimum price gap (spread).

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USD/JPY, on the contrary, is much more volatile during the Asian session. This information has been prepared by IG, a trading name of IG Markets Limited. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. 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.

most volatile currency pairs

Due to this greater movement, position sizing is crucial when trading high-volatility currency pairs. If there were no volatility at all, then you would expect that a currency would gain or lose the same amount every day. But instead, what you see is that some days a currency will rise substantially, while on other days it might fall by an even greater percentage, making it a highly volatile currency pair. USD/JPY is the US dollar ticker against the world yen exchange rate. This top currency pair among traders has the pseudonym “ninja” because the heroic character of medieval invisible spies became, at one time, a symbol of Japan. USD/JPY is actively used by large firms and private traders on currency exchanges, ranking second in the ranking of currency pairs after.

most volatile pairs in 2022

So, to begin, we will first help you understand the definition of volatility and currency pairs, then look at the most volatile currency pairs. After reading this guide, you will find it easy to choose the best currency pairs to trade. If you want to trade one of the most volatile currency pairs, you can open an FXOpen account and start today.

GBPUSD EURUSD implied vols pick up ahead of key data … –

GBPUSD EURUSD implied vols pick up ahead of key data ….

Posted: Tue, 15 Aug 2023 07:00:00 GMT [source]

This is because as oil prices rise, more yen must be converted into CAD to buy a single barrel of oil, with this increase causing the price of CAD/JPY to rise. The first volatile currency pair on our list is AUD/JPY, which represents a pairing of the Australian dollar against the Japanese yen. This pair enjoys high volatility thanks to the inverse relationship between the Australian dollar and Japanese yen.

The Impact of Exchange Rates on Trading Returns

You can define min and max levels to easily filter out the irrelevant date for your trading strategy. Volatility in the Thai Baht has picked up since the beginning of the pandemic. It is a popular emerging market currency as it is fairly liquid while its volatility creates trading opportunities.

most volatile currency pairs

Compared to the stable USD, the Turkish Lira is highly volatile due to the high inflation rate and political instability in Turkey. The higher the price of gold, the higher the appreciation of USD against ZAR. Drastic appreciation of USD relative to ZAR will increase the cost of trading AUD/ZAR. Another reason for the volatility is the Mexican higher interest rate compared to the US, which maintained a lower rate. Lastly, the Mexican economy is backed by oil export, as such fluctuation in oil price greatly affects MXN.

the most volatile Forex pairs

It is an important indicator of changes in exchange rates, so traders and investors use it to assess risk. If, in a set time, the price changes dramatically and with large spreads, the volatility is high. Traders looking to trade lower volatility pairs may favor a strategy of swing trading. Once a currency in the range has been identified, traders can set support and resistance. Volatility of a currency pair is determined by the size of its price variation or movement.

If many participants are in the market with buy and sell orders, the asset is liquid. If there is no one to sell the purchased asset and you need to greatly reduce the price in order to get rid of it, then the asset is considered illiquid. Exotic currency pairs are instruments with low liquidity, while volatile major currency pairs are highly liquid.

What Does Volatility Depend On?

This is good for South African exporters because it means that they will get more US dollars for their gold on the world markets. The GBP/AUD pair is comprised of the British pound and the Australian dollar. Historically, these two currencies have been correlated, particularly since Australia is part of the Commonwealth of Nations. However, being a commodity currency – as previously mentioned – the price of AUD is heavily linked to the value of Australia’s exports.

Knightsbridge Foreign Exchange is registered and regulated by FINTRAC (a government of Canada agency). Like most financial institutions, we are required to validate the identity of all clients. Using the example of CAD/JPY, the base currency, CAD, is also called the bid price, and JPY, the quoted price, is also called the ask price. It is essential to know the market values of the bid and quote a price to help you determine if the pair is worth trading.

The Most Volatile Currency Pairs and How to Trade Them

Illustrated below, the average true range (ATR) on USD/CHF ranges between 45-pips and 65-pips, a low average true range compared to other pairs. The average true range of a currency is one of the many ways to measure the volatility of a currency pair. Bollinger Band width is another popular technical indicator used to measure volatility. Rather than liquidate their entire position, which could be a considerable amount, they will enter another trade to offset any losses they see coming up and protect their long-term gains. But say, in this instance, you don’t execute your order for two days.

Volatility tells you how drastically a certain currency has moved within a timeframe. This helps you adjust your trading systems and trading times to perfectly suit your trading style. Usually, a Forex trader looking for low and steady returns and less risk would prefer to trade low volatility pairs. On the other hand, traders that can accept higher risk would prefer to trade high volatility pairs to profit from the volatile price movements. Keep in mind that other factors such as your
position size
should be part of your risk management. Exotic currency pairs will generally see higher volatility, while major currency pairs tend to be less volatile.


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