Which currency pairs are the most volatile
Volatility is a degree of variability in the price of a financial instrument over a certain period of time.
High volatility simultaneously carries high trading risks and the possibility of obtaining large profits.
Therefore, traders choose more or less volatile currency pairs depending on what is more important to them - high profit or minimal risk.
What determines the volatility
A concept of volatility is inextricably linked with the concept of liquidity of a trading instrument. Liquidity is, in fact, the amount of demand and supply in the market.
Consequently, the more indicators of supply and demand, the more difficult it is to shift the price of an asset from a place, that is, the lower its volatility.
In addition to liquidity, the most important economic and political events taking place in the world are a significant factor influencing the price change.
The volatility of any asset always depends on the countries’ economies whose currencies are represented in this pair. If in a pair one currency belongs to a country with a developed raw material economy, and the other is represented by a state whose economy is based on services, then the amplitude of the price change of the asset in question in the market will be very high.
The reason is due to the deep internal differences between the economies of these countries.
The most volatile forex pairs
The most volatile Forex pairs are exotic, namely USD/SEK, USD/BRL and USD/DKK.
All these pairs pass on average over 400 points a day.
The volatility of the major currency pairs is much lower.
The Most and Least Volatile Currency Pairs in 2020
Only GBP/USD, USD/JPY and USD/CAD pass more than 100 points a day. And the EUR/USD is the least volatile, as its liquidity is the highest among all other currency pairs.
Among the cross-rates, the most volatile are GBP/NZD, GBP/AUD, GBP/JPY and GBP/CAD currency pairs. All these pairs pass on average more than 200 points a day.
EUR/CHF, CAD/CHF, AUD/CHF and EUR/GBP are the least volatile among cross-rates.
Most Volatile Forex Pairs: What Are They?
The amplitude of their movements, in general, does not exceed 90 points a day.
The degree of volatility of currency pairs may vary depending on the trading session.
For example, the pair USD/CAD will be the most volatile during the American trading session, and the smallest variability of its rate usually falls on the time of Asian trading.