For instance, when the COVID pandemic started, this triggered an increase in the market’s volatility. The EUR/USD currency pair is the most traded currency pair on the market to date. The volatility of a currency pair can change over time as factors change. We have researched 10 forex pairs to find the ones that are the most volatile in the market.

Ezekiel Chew the founder and head of training at Asia Forex Mentor isn’t your typical forex trainer. He is a recognized expert in the forex industry where he is frequently invited to speak at major forex events and trading panels. His insights into the live market are highly sought after by retail traders. I recall the dramatic drop in oil prices a few years back, which sent the USD/CAD pair soaring as the CAD weakened.

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. In the Singapore and Sydney exchanges, where there is far less volume than during the London/New York window. The South Korean Won, in its current form, was formed after the Second World War. Following separation, the South allied with America and the North allied with Russia and as a result, the economic differences between capitalism and communism became apparent. If the price of gold is rising, the price of the dollar will most likely also increase against ZAR.

Factors that affect the price of Forex pairs.

A currency pair’s stability depends on the base and quoted currency pair’s stability. In volatile markets, large sums of money can be lost as quickly as it is made. The economic state of a nation, inflation, interest rate, government policies, etc., affects the value of a currency. Generally, the value of every currency in the world fluctuates, though by a minute, Forex traders take advantage of these small changes, you could say, daily. Moreover, the US dollar is a global currency because the United States because of a flexible and robust economy. Furthermore, changes in the price of these exports are bound to happen at certain intervals, leading to high levels of volatility.

Top 6 Most Volatile Currency Pairs

Volatility is a measure of how much price tends to move in a given financial market. In this article, we will be using the average 30-day realized volatility over the last 3 years to measure volatility. This provides us with a historical perspective on the currency pairs’ price movements.

Practice Prudent Risk Management

Trading volatile pairs can be risky due to the potential for significant losses and large gains. Leverage magnifies this risk even more, and slippage can occur when there is a gap between the expected price and the actual trading price, which may decrease profits or increase losses. Sentiments are inherently volatile and can shift rapidly, particularly when fueled by real-time news updates or most volatile currency pairs social media discussions. These fluctuations can result in swift and substantial movements in currency pairings. South Africa’s political situation, export prices of commodities, and economic performance indices are key factors that influence volatility in the USD/ZAR exchange rate.

1. Moreover, trading platforms and mobile applications provide real-time access to market data and analytical tools.
2. So, in summary, the more liquid an asset is, the less volatile that asset would be and the lower the trading costs.
3. These traders often have experience in managing risk effectively and are skilled in executing trades quickly in rapidly changing market conditions.
4. Turkish politics remains highly unstable, with many still supporting the Peace at Home Council – the group behind the failed coup.
5. Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose.

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. GBP/EUR is a matching of the British pound against the euro and, following Brexit, this pair has seen constant volatility.

The Most Traded Currency Pairs in Forex Trading

Major geopolitical developments, economic data releases, and central bank announcements can cause significant fluctuations in currency pair prices. As a result, staying updated on these news events is essential for traders seeking to navigate volatile market conditions successfully. Trading the most volatile currency pairs in Forex can offer significant opportunities for profit, but it also comes with increased risk.

1. USD is seen as one of the most stable currencies, allowing the rand’s instability to create volatility in its currency pair.
2. The forex currency pairs discussed in this article can offer various trading opportunities, depending on individual risk tolerance and trading strategies.
3. However, high volatility also leads to increased risk, so managing that risk is crucial.
4. It has also experienced significant price swings, losing more than 20% against the US dollar with a high-to-low range of almost 50%.
5. As a result, the USD/CHF pair tends to show lower volatility compared to other currency pairs.
6. Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors.
7. Speculators are waiting to see whether volatility in this pair will ease off after 31 October – the official deadline for the UK’s departure from the EU to be finalised.

When the lockdowns were lifted, the capacity to satisfy the demand for goods and services from the population flush with cash was minimal. This set up a situation where inflationary trends took hold of many economies worldwide, and inflation levels hit sky-high levels that had not been seen in two or three decades. To put it all in context, the charts below are added to show how volatile two of the currencies on this list are. The price ranges over a chosen period for the GBPJPY and USDMXN are shown, and contrasted with the GBPUSD. Using tactics like breakout pullback entries allow traders to benefit from these explosive moves on pairs like AUD/JPY.

In instances where an election outcome is unexpected, it could lead to doubts concerning a country’s economic path, leading to the depreciation of its currency. In contrast, the Japanese yen has long been perceived as a safe haven, with its worth increasing when signs of global instability occur. To illustrate the non-constant nature of volatility, let’s look at the Forex Volatility Calculator. We should note that, by definition, volatility tends to change over time and is not a constant.