Most Volatile Currency Pairs to Trade in Forex
Forex trading is the conversion of one currency to another, intending to gain from fluctuating exchange rates. Forex traders can choose from various currency pairs, depending on their preferences, strategies, and risk tolerance.
Volatility is one of the factors that forex traders should consider when selecting a currency pair. Volatility refers to the price movement of a particular currency pair within a specific timeframe. The most volatile currency pairs to trade in forex indicates the market’s uncertainty and risks as well as its potential for gains or losses.
Key Factors Influencing Volatility
Several factors can influence volatility such as-
- Economic data
- Political events
- Market sentiment
- Supply and demand
- Interest rates
- Central bank policies
Among the other factors, volatility may also vary in time of day, session, or season. Some forex traders prefer volatile currency pairs because they offer more opportunities for profit-making as well as being more thrilling and challenging. However, in doing so, they are also subjected to higher risks since the prices tend to fluctuate.
Forex Volatility Insights- The Dynamics of Major Currency Pairs
GBP/USD
This currency pair has an average daily volatility of 0.92%, an average weekly volatility of 2.07%, and an average monthly volatility of 4.29%. GBP/USD is affected by the economic and political developments in the US and UK including Brexit, tariffs, fiscal and monetary policies, and Covid-19 among others. Market sentiment and risk appetite also affect GBP/USD as GBP is considered a higher-risk currency compared to USD.
EUR/USD (Euro / US Dollar)
This currency pair has an average daily volatility of 0.74%, an average weekly volatility of 1.63%, and an average monthly volatility of 3.60%. EUR/USD is influenced by the economic and political developments in European zone countries such as the Covid-19 pandemic, recovery fund program, vaccine rollouts, stimulus package, and interest rate differential among others. The market situation that is prevailing also determines how this particular exchange rate behaves where it can either go up or down due to reasons such as market sentiments or peoples’ desire for risk aversion.
USD/JPY (US Dollar / Japanese Yen)
This currency pair has an average daily volatility of 0.58%, an average weekly volatility of 1.28%, and an average monthly volatility of 2.83%. USDJPY moves are usually determined by what happens between the US-Japan economy, which invokes issues such as the coronavirus pandemic; fiscal policy; monetary policy; etc
GBP/AUD (British Pound / Australian Dollar)
This forex pair has an average daily volatility of 1.09%, an average weekly volatility of 2.43%, and an average monthly volatility of 5.11%. GBP/AUD is influenced by what goes on economically and politically in the UK and Australia such as Brexit talks, trade ties, the Covid-19 response, and commodity prices. Moreover, the market’s sentiment as well as risk appetite plays a significant role in determining the direction of this pair since both GBP and AUD fall into risky categories that sway according to international climate.
GBP/JPY (British Pound / Japanese Yen)
The currency pair has an average daily volatility of 1.02%, an average weekly volatility of 2.27%, and an average monthly volatility of 4.76%. What influences GBP/JPY is development on the economic side and political movements in the UK versus Japan in addition to factors affecting GBP/USD, USD/JPY among others. Thus it can be concluded that changes in market perception coupled with low or high risk aversion determine its rate fluctuations just like any other risky asset class as compared to safe havens.
GBP/CAD (British Pound / Canadian Dollar)
The cross has shown an average daily volatility of 0.99%, an average weekly volatility of 2.21%, and an average monthly volatility of 4.67%. GBP/CAD is affected by economic and political developments in the UK and Canada such as the outcome of Brexit, trade relations, the Covid-19 situation, and crude oil prices. The pound sterling being highly volatile, it reacts to market sentiment and risk appetite just like the CAD does; this makes both currencies more risky compared to other currencies.
Top Volatile Exotic Currency Pairs for 2024
USD/ZAR (US Dollar / South African Rand): This currency pair is influenced by the economic and political developments in the US and South Africa. The COVID-19 crisis, fiscal policies & monetary policies, social unrest & credit ratings respectively. USD/ZAR is also affected by market sentiment and risk appetite since ZAR is a high-risk/high-reward currency that is sensitive to global dynamics.
| Volatility | Daily | Weekly | Monthly |
| Average | 1.60% | 3.54% | 7.37% |
USD/TRY (US Dollar / Turkish Lira): This currency pair has an average daily volatility of 1.50%, an average weekly volatility of 3.32%, and an average monthly volatility of 6.94%. USD/TRY is influenced by the economic and political developments in the US and Turkey: the COVID-19 pandemic, inflation & interest rates, geopolitical conflicts, and currency interventions. The market sentiment and risk appetite are also on the USD/TRY which is regarded as a high-risk and high-reward currency, which tends to be highly volatile and unpredictable.
| Volatility | Daily | Weekly | Monthly |
| Average | 1.50% | 3.32% | 6.94% |
USD/MXN (US Dollar / Mexican Peso): This currency pair is affected by events in the US and Mexico, such as COVID-19, trade and immigration policies, fiscal and monetary policies, oil prices, etc. USD/MXN is also influenced by market sentiments and risk aversion as MXN is considered a high beta risky asset that reacts very much to global events.
| Volatility | Daily | Weekly | Monthly |
| Average | 1.36% | 3.02% | 6.33% |
Wrapping Up
Based on their historical data and recent trends, most volatile currency pairs to trade in forex pairs are some of the most volatile in 2024. However, traders need to bear in mind that volatility changes over time depending on various factors. While these currency pairs have demonstrated notable volatility in the past year, it’s crucial for traders to stay vigilant as market conditions evolve. AstraMarket offers a comprehensive platform equipped with tools and indicators to help traders analyze and gauge volatility levels effectively. Hence, traders should always watch out for market conditions and use suitable tools together with indicators for gauging as well as analyzing the volatility levels of any given traded currency pair.
