When volatility is lower than average, for example, at the border
of the European and Asian sessions, an aggressive trader can make a pause and
prepare for trades on this or that session. 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.
- The fact is that various methods of technical analysis might not work in such situations.
- Because of this, traders who are interested in the USD/ZAR pair should carry out sufficient analysis on the price of gold and the factors which affect its price before opening a position.
- FX markets are vulnerable to a range of factors that cause price fluctuations, and many investors modify their strategies to take advantage while also ensuring FX currency protection.
- Mathematical and technical tools include standard deviation, channel indicators (channel expansion means increased volatility), ATR indicator, and volatility calculator.
This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion.
Here we will talk about the most volatile currency pairs in the Foreign Exchange (Forex) market in 2023.
It is available in 100+ countries and has onboarded more than 25 million online traders in the recent past. And here, you get access to 49 currency pairs, including some of the most volatile majors, minors, and exotics. The major currency pairs include the most actively traded currency pairs in the forex market such as EUR/USD, GBP/USD, USD/JPY, and USD/CHF. The US Dollar, Swiss Franc, and Japanese Yen are considered to be safe-haven currencies. Now that you know what volatility and currency pairs are and how they relate, we can look at the most volatile currency pairs.
This method is usually short-term protection when a trader is concerned about news or an event triggering volatility in currency markets. Observing this graph, the average true range of USD/CHF ranges between 45 and 65 times the average true range, a low average true range compared with other currency pairs. The true average range (ATR) is a technical indicator used to measure the volatility of a currency pair.
- Some traders prefer trading volatile currency pairs because of the higher potential gains.
- Some of the factors influencing the FBP/NZD price action and which you ought to consider when trading the pair include the GDP growth of Britain, New Zealand, China, and Australia.
- Individually, the two are some of the world’s most traded currencies.
- But we include it here primarily due to the integration of copy and social trading tools into its ecosystem.
- The NZDJPY is regarded as a volatile currency because JPY is stable while NZD is not a stable currency.
This pair consists of the U.S. dollar quoted versus the Turkish lira and is extremely sensitive to the outcome of the 2020 U.S. presidential election. According to some economists, Biden plans to penalize Turkey for their purchase of an air defense system from Russia. The currency pair hit all-time highs before the election and has sold off significantly in the following days. As an emerging market, Brazil is an exciting economy for those seeking to capitalise on the forecasted future development of the South American country. However, politics in Brazil has been unstable at times, with corruption dominating headlines in the last decade or so.
What Are the Most Volatile Currency Pairs?
Gold is a significant export of South Africa, and the commodity’s price on the world market is in US dollars, meaning the cost of gold depends on the value of the US Dollar. The ISO currency code denotes the https://g-markets.net/ three-letter alphabetic codes of currency pairs. For example, you write the Canadian Dollar as CAD, and the Japanese Yen is JPY. So, when trading the CAD against the JPY, the currency pair will be CAD/JPY.
Capital.com is a pure-CFD online trading platform that lists 130+ currency pairs. These include all the volatile currency crosses we have discussed above and a wide range of Major, Minor, and exotic pairs. It is not enough to learn of the most volatile fx pairs to trade today, how they are traded, or the factors influencing their price action – and your trading decision, by extension. Making money when forex trading starts with the choice of a good and reliable forex brokerage. The NZD/JPY cross is a commonly traded minor currency pair pitting two of the largest economic giants in the pacific – Japan and New Zealand. The Japanese Yen is one of the most sought-after safe haven currencies, while the New Zealand dollar is heavily correlated to commodity prices.
Others are the price of New Zealand’s leading export – dairy products and news/events about the economy of these countries. South African Rand is considered a commodity currency due to South Africa being a major commodity exporter. ZAR has traditionally seen higher volatility due to political factors and fluctuations in the commodities markets.
This pair consists of the British pound sterling quoted versus the U.S. dollar. The pound has experienced notably turbulent and highly volatile trading conditions since the 2016 Brexit announcement, and this was further exacerbated by increasing inflation numbers. This USD/HUF currency pair consists of the U.S. dollar quoted versus the Hungarian forint, where the forint has remained under pressure since the onset of the economic outlook. This pair consists of the U.S. dollar quoted versus the Norwegian krone. The NOK is also highly sensitive to oil prices and was hit especially hard when crude oil prices collapsed in mid-March of 2020. The krone was negatively affected by risk aversion after the oil collapse and coronavirus outbreak.
Gold is a common hedge against inflation, meaning shifts in inflation rates or monetary policy, particularly in the US, can result in large movements in this currency pair. That works well for the two currencies because Japan is a significant importer of oil. So, an increase in oil price leads to the rise in the cost of buying the Canadian Dollar using the Yen.
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Contrary, they say there is little volatility if the asset price doesn’t change throughout time. The picture below illustrates the highly volatile EUR/AUD currency pair. Speculators are waiting to see whether volatility in this pair will ease off after October 31 – the official deadline for the UK’s departure from the EU to be finalized.
Building a great tech company requires risk, but doesn’t require currency risk. This website is owned and operated by IG Bank S.A. Registered address at 42 Rue du Rhone, most volatile currency pairs 1204 Geneva, authorised and regulated by FINMA. This was exacerbated by the election of Jair Bolsonaro – a far-right populist – to the presidency in January 2019.
It is easiest to trade currency pairs with low volatility, the quotes of which depend on a smaller number of fundamental factors. Such pairs should not have sharp price jumps, deep drawdowns, or abnormal peaks. It is highly desirable that assets show short or long-term trends and have high liquidity.
Information is of a general nature only and does not consider your financial objectives, needs or personal circumstances. Important legal documents in relation to our products and services are available on our website. You should read and understand these documents before applying for any AxiTrader products or services and obtain independent professional advice as necessary. Except for the black swan event in 2015 and a few occasional “incidents”, the CHF does not move much, especially against other major currencies such as the Euro and the US Dollar. Turkish politics remains highly unstable, with many still supporting the Peace at Home Council – the group behind the failed coup. This instability was reflected in the fact that the lira fell following heavy losses to President Recep Tayyip Erdoğan’s AK Party in elections held throughout 2019.
Trading cross-rates is more difficult compared to major currency pairs. Traders must track not only news on cross-currencies but also on USD, which sets the price movement for other currencies. For example, negative statistics on inflation came out in the USA – investors switched from the dollar to the British pound. As a result, the pound rose in price against other currencies, although there were no reasons for this in the UK itself. The most volatile are the currency pairs of emerging and developed markets paired with exotics. Due to the fact that exotic pairs are not very suitable for beginners, the emphasis in this block is on the cross-rates of the major volatile currencies.
However, while increased volatility may offer more scope to realise a profit, it can also increase a trader’s exposure to risk. However, while increased volatility may offer more scope to realize a profit, it can also increase a trader’s exposure to risk. The least volatile currency pairs tend to be the major currency pairs which are also the most liquid. This attracts more trading volume and facilitates greater price stability in turn. To that end, considering EUR/USD, USD/CHF and EUR/GBP trade with high volumes of liquidity, it comes as little surprise they are among the lease volatile currency pairs. Aside from relatively low liquidity, emerging market currencies tend to be highly volatile in particular due to inherent risk underpinning emerging market economies.