The Least and the Most Volatile Currency Pairs in Forex

Among US dollar pairs, the South African Rand (ZAR) has the highest volatility. The New Zealand dollar, closely tied to the Australian economy, has exhibited similar volatility to the AUD, with an average volatility of 9.5% over the last three years. Discover how to increase your chances of trading success, with data gleaned from over 100,000 IG accounts. Adding to this, there has been an economic slowdown following a two-year recession that started in 2015 and caused the economy to contract by 7%. Bolsonaro himself has said that he knows little about economics, and so volatility is likely to remain in this pair throughout his premiership. For example, the pound increased against the euro following the first defeat of Theresa May’s Brexit deal in the Commons by 230 votes in January 2019.

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. Largely speaking, volatile pairs are affected by the same drivers as their less-volatile counterparts.

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The yen is seen as a safe haven, and the Canadian dollar is a commodity currency, with its value on the currency market heavily influenced by the price of oil on the commodity market. Conversely, the Japanese yen is widely considered to be a safe-haven currency, meaning that investors often turn to it in times of economic hardship – something which they do not do with the Australian dollar. Brazil’s Real has been another volatile currency this year, particularly with the country’s economic challenges and dependence on commodity exports like soybeans and coffee. The USD/BRL pair has seen large swings, especially as the USD weakens or strengthens in response to global economic data. Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Spot Gold and Silver contracts are not subject to regulation under the U.S.

1. These measures play a pivotal role in safeguarding a trader’s funds against the inherent unpredictability of the market and shielding them from substantial losses.
2. With average daily ranges of 350 pips, prices can catapult higher or lower very rapidly.
3. Our curated playlists can help you stay up to date on current markets and understanding key terms.
4. It’s crucial to trade only with funds you can afford to lose and to consider the impact of leverage on risk.

Correlation refers to the relationship between two currencies and how they tend to move in relation to each other. Positive correlation means that two currencies move in the same direction, while negative correlation implies they move in opposite directions. One of the trend-following strategies has to do with the entry when the currency pair is already in the trend. Currency pairs do not move in a straight line whenever they are in the trend. There are always periods when the price action will undergo a retracement.

The Turkish Lira has been hit hard by inflation and political instability, leading to massive swings against the Dollar. I remember a trade in April where the Lira’s value dropped significantly in just a few hours, offering a high-risk, high-reward scenario. New Zealand’s economy has been under pressure, and the NZD/JPY pair reflects that. With the Reserve Bank of New Zealand considering rate cuts, the NZD has weakened, but the Yen’s strength, especially during periods of risk aversion, has made this pair highly volatile. The AUD/JPY pair is another one where I’ve seen big moves, particularly during periods of global uncertainty.

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This pair, often referred to as “The Dragon,” has been one of the most volatile of the year. With the UK’s economic situation being uncertain and the Yen fluctuating as a safe haven, GBP/JPY has offered some of the most dramatic moves, especially around UK economic data releases. I’ve also kept a close eye on CAD/JPY, where the Canadian Dollar’s sensitivity to oil prices has been a significant driver of volatility. When oil prices dropped sharply earlier this year, the CAD lost ground against the Yen, creating some great trading opportunities. The US dollar and Mexican peso is like many other dollar pairs, but this currency pair stands on its own because of Mexico’s proximity to the US.

This is the difference between the price at which a currency pair can be bought and sold. Continuously monitor your selected forex pairs and adapt to changing market conditions. Stay informed about economic developments, news events, and technical signals that may affect currency movements. Be prepared to adjust your trading approach as needed based on new information and market dynamics. Before we delve into the rankings, let’s first understand how volatility is measured.

AUD/JPY (Australian Dollar/Japanese Yen)

1. It is an important indicator of changes in exchange rates, so traders and investors use it to assess risk.
2. This means that the other will fall when one currency rises against another.
3. With low fees and a global presence in over 170 countries, we provide you with the resources to learn and trade effectively.
4. Traders gauge volatility through standard deviation, variance, or average true range (ATR).
5. The difference between interest rates of the currencies in a pair impacts volatility.
6. The UK pound has been relatively stable against the euro since the Brexit vote.
7. When traders are uncertain about a currency’s true value amidst economic news, its price tends to swing erratically.

The strengths of the euro most volatile currency pairs as the representative of several united economies also leave it open to vulnerabilities if just one of those countries experiences economic instability. Meanwhile, the pound now has more independence to weather inflation rates and trade relationships on its own, creating new opportunities for volatility. The physical proximity and deep trade relationships between the pound and euro, however, make it easy for traders to follow and trade the volatile currency pair.

However, with great opportunity comes great risk if appropriate precautions aren’t applied. Major news events, data releases, elections, wars, and other geopolitical happenings can cause extreme volatility. For example, unexpected interest rate decisions from central banks, unforeseen election outcomes, and sudden conflicts can all trigger huge swings.

High volatility means the price of a currency pair changes rapidly over a short period, offering potential for high returns but also higher risk. This major pair highlights the changes in Canada’s commodity economy compared to the US dollar. It accounts for a majority of reserve currency in central banks around the world. Because these countries neighbour each other, their economies are active at the same time. This concentrates the pair’s volatility to the New York trading session. Integrating technical analysis with volatility considerations is a powerful approach for making informed trading decisions during news-driven market conditions.

Creating a watchlist involves compiling a list of currency pairs that you are interested in trading or have potential for based on your analysis. This allows you to focus your attention on specific pairs and monitor their movements more effectively. As a result, currency pairs which contain AUD have seen increased volatility since the start of the trade war.

Currency pairs differ in terms of volatility levels and traders can decide to trade high-volatile pairs or pairs with lower volatility. The volatility of a currency pair shows price movements during a specific period. Smaller price movements will indicate lower volatility whereas higher or more frequent movements mean higher volatility. The foreign exchange – FX or forex market is a global marketplace for exchanging national currencies against each other. As with any financial market, the Forex market has a bid price, ask price, and spread.