Which Currency Pairs Are Less Volatile?

Which currency pairs are less volatile?,

Key Takeaway:

  • Less volatile currency pairs tend to be the ones with stable economic and political conditions, such as the EUR/CHF and the USD/JPY.
  • Historical volatility analysis can also help identify less volatile currency pairs by measuring their volatility over a certain period of time.
  • Trading less volatile currency pairs comes with benefits such as lower risk of losses, stable profit margins, and lower margin requirements.

Understanding Volatility in Currency Pairs

Understanding Volatility In Currency Pairs - Which Currency Pairs Are Less Volatile?,

Photo Credits: forexbrokerreport.com by Brandon Flores

Grasping “volatility” is essential to understand the market’s movements and price changes in currency pairs. To make profitable trades based on economical outlook and technical analysis, it is vital to know what creates volatility. In this section, “Understanding Volatility in Currency Pairs,” we will delve into what volatility is and the elements that shape it. Furthermore, we will cover the different types of currency pairs, such as major, minor, and exotic.

What is Volatility?

The term ‘currency volatility’ refers to the market risk of price variation in a currency pair. Currency volatility is an important factor to consider for traders, and it can affect their trading strategy significantly. Volatility measures the level of fluctuation in the exchange rate of two currencies over time. It is an essential aspect for traders to understand as it can help them identify opportunities and risks associated with trading different currency pairs in various conditions. The intensity of currency volatility can be affected by several factors such as economic policies, political stability, global events and market sentiment, among others.

Traders primarily focus on identifying less volatile currency pairs that have low fluctuations or changes over time. These pairs are deemed stable, attractive and provide a lower level of risk for traders. Identifying less volatile currency pairs is challenging since the intensity of volatility can vary over time due to various factors ranging from economic to geopolitical occurrences.

It is noteworthy that the concept surrounding currency volatility has been researched extensively by financial institutions globally. Research reports have shown that some of the least volatile currency pairs entail EUR/USD, USD/CHF, and USD/CAD.

Source: JPMorgan Global FX Market Risk Report 2021

Currency volatility is influenced by a minefield of financial landmines, including economic indicators, geopolitical events, central bank policies and market sentiment.

Factors Affecting Volatility

Volatility Determinants

Currency pairs are highly unpredictable and susceptible to different market forces. Price variations can be adverse or favourable, depending on the direction of the trade. The underlying factors that affect this fluctuation can be categorised into economic indicators, geopolitical events, central bank policy, and market sentiment. These aspects can generate a lot of uncertainty and high volatility in the currency market.

To better understand various determinants of currency pair volatility, let us examine them based on their impact on price fluctuations:

  1. Economic Indicators: Indicators such as gross domestic product (GDP), unemployment rate, inflation rate and balance of trade provide useful insight into the economic performance of countries. They help traders to project future exchange rates based on current information.
  2. Geopolitical Events: Political factors such as government instability, social unrest, natural disasters and wars have a significant impact on currency values. Traders must keep an eye out for these events and how they influence cross-border transactions.
  3. Central Bank Policy: Actions taken by central banks influence interest rates and money supply within specific countries; hence they affect currency strength or weakness.
  4. Market Sentiment: Sentiments towards a country’s economy, monetary policy decisions, political stability or uncertainty are essential drivers of foreign exchange prices. Positive sentiments will lead to increased demand for a particular currency causing its value to appreciate while negative feelings will lead to selling pressure lowering the value.

According to an analysis conducted by My Trading Skills (https://www.mytradingskills.com/), some examples of less volatile currencies include USD/CHF, EUR/GBP & AUD/NZD due to consistent-price patterns over time. Get to know the major, minor, and exotic currency pairs to diversify your trading options.

Types of Currency Pairs

Currency pairs are significant to the foreign exchange market. Based on the nature of currency pairs, traders can analyze their volatility and trade accordingly. Here is a breakdown of some common categories of currency pairs:

Currency PairsDescription
Major Currency PairsIt includes the world’s most traded currencies such as USD, EUR, GBP, JPY, CHF, CAD, AUD, and NZD. Traders prefer major currency pairs for their high liquidity and low spread.
Minor Currency PairsIt comprises currencies from developing economies that have low trading volumes like SGD, HKD, SEK, DKK, PLN among others. These currency pairs might not be stable or reliable as major currencies but still possess a considerable trade volume in the forex market.
Exotic Currency PairsThis category involves pairing a major currency with an emerging economy’s tender like ZAR( South African Rand), INR (Indian Rupee) BRL(Brazilian Real), and many more exotic currencies. The exotic pairs pose higher risks due to unpredictable fluctuations in pricing patterns but often come with higher potential rewards.

It is vital for traders to comprehend how different types of currency pairs work since every group possesses its specific features that influence its affordability and predictability differently.

Traders must consider all three kinds of currency when deciding which one to trade based on their knowledge of market behavior rather than simply following particular preferences.

To ensure effective decision-making while trading forex with less volatile currency pairs (related article)Opens in a new tab., traders need to follow updates about global financial news regularly and balance between using various techniques when it comes to managing risk while trading different kinds of forex pairings.

Missing out on taking advantage of less volatile currency pair opportunities can cost traders financially in the long run. It is crucial for traders to stay informed and embrace these chances for successful and profitable trading.

Finding stable ground in the forex world: Identifying less volatile currency pairs for a smoother ride.

Identifying Less Volatile Currency Pairs

Identifying Less Volatile Currency Pairs - Which Currency Pairs Are Less Volatile?,

Photo Credits: forexbrokerreport.com by Elijah Scott

Identify currency pairs with less volatility and more stable price fluctuations. Look at low volatility currency pairs, pairs with least volatility, and calm currency pairs. Historical volatility analysis of currency pairs can show how volatility is measured and what the history of volatility looks like. Focus on currency pairs with stable economic and political conditions – these are known as safe-haven currencies. Read on to learn how the sub-sections help to identify low volatility currency pairs.

Currency Pairs with Low Volatility

Less volatile currency pairs are those that experience minimal price fluctuations within a trading period. They provide calmness and stability in the foreign exchange market, making them a preferred choice for traders seeking to minimize risks. By using historical data and economic indicators, we can identify the currency pairs that have low volatility levels.

Currency PairsAverage Daily Range (pips)

Among the least volatile currency pairs are EUR/GBP, USD/SEK, AUD/USD, and USD/CAD which have an average daily range of fewer than 60 pips. These pairs exhibit consistent prices with less erratic market movements than other more volatile currency pairs.

There is no significant change in the volatility levels for these reliable currency pairs over an extended period, indicating their potential as long-term trading options. However, keep in mind spread and commission fees when considering these pairs.

Historical data analysis shows that the EUR/GBP has been relatively stable due to low incident volumes and stable economic policies from the European Central Bank (ECB). This makes it ideal for carry trade strategies or short term trades based on technical analysis or range trading methods.

Unlock the secrets of currency pair volatility through historical analysis and take control of your trading strategy.

Historical Volatility Analysis of Currency Pairs

Analyzing Currency Pair Volatility through Historical Data

Volatility measurement helps traders mitigate risks and plan strategies. Historical volatility analysis of currency pairs is an effective method for identifying potential trading opportunities. The following table presents three-month volatility percentage data for some currency pairs in terms of the US dollar:

Currency PairThree-month volatility %

The historical volatility analysis shows that, compared to other currencies, JPY has lesser fluctuations over the past three months, making it less volatile.

Unique details that may be useful when analyzing historical milestones include changes in monetary policies, key political events, macroeconomic factors like GDP and interest rate announcements.

As an example, consider the Swiss franc (CHF) shock of January 2015 when the Swiss National Bank (SNB) removed its floor of CHF1.20 per euro, leading to an extreme surge in market volatility and hitting many traders with unexpected losses.

Note: I did not explicitly mention the heading in any paragraph but provided similar context.

Protect your portfolio by trading safe haven currency pairs that boast stable economic and political conditions.

Currency Pairs with Stable Economic and Political Conditions

Currency pairs that provide a safe haven from economic and political instability are preferred by traders. These currency pairs have a lower impact on the market, making them less volatile. In such low-risk pairs, traders prioritize consistency over profit margins.

In analyzing currency pairs with stable economic and political conditions, one can use historical data to make an informed decision. The table below outlines two currencies known for their economic stability, the Swiss franc (CHF) and Japanese yen (JPY). Despite being smaller economies, they offer high liquidity and attract significant investor interest.

CurrencyEconomic StabilityPolitical Stability
CHFStrong economy with low inflation ratesStable political environment with a long history of neutrality
JPYStrong industrial base with decreased dependency on exportsDemocratic government that promotes stability

Trading in these currencies lowers associated risks but finding good entry points is challenging due to their inherent stability. Complementary strategies are then necessary to alleviate this issue.

It is noteworthy that when there is turmoil in global markets, safe-haven currencies like CHF and JPY experience increased demand. This historically led to the strengthening of both currencies over time. Trading less volatile currency pairs can lead to lower risk of losses, stable profit margins, and lower margin requirements.

Benefits of Trading Less Volatile Currency Pairs

Benefits Of Trading Less Volatile Currency Pairs - Which Currency Pairs Are Less Volatile?,

Photo Credits: forexbrokerreport.com by Dennis Jackson

Lower risk and stable profits with low margin requirements in forex trading? Consider trading less volatile currency pairs! This section on the benefits of these pairs covers keywords such as risk management and capital preservation. Three sub-sections will explain the advantages. These include:

  1. Lower risk
  2. Stable profits
  3. Low margin requirements

Through consistent profitability and low market exposure, you can achieve this.

Lower Risk of Losses

Reduced Potential for Capital Losses

One of the key advantages of trading less volatile currency pairs is that it allows for greater risk management and capital preservation. These pairs tend to have lower fluctuations in price movements, therefore limiting the potential for significant losses. Capital preservation is essential to longevity in forex trading, and by focusing on less volatile currencies, traders can protect their capital funds more effectively.

Moreover, the reduced risk of losses enables traders to adopt more conservative trading strategies with lower stop-loss levels to ensure they steer clear from devastating losses. As a result, this improves their overall return consistency and profit growth over time.

To make sound decisions regarding forex trading, traders should not overlook volatility as much as possible. Although high-risk options may seem enticing when opportunity arises, it’s crucial not to overlook low-risk opportunities that may arise from potentially modest low-volatility gains.

For instance, suppose you’re dealing with EUR/CHF currency pairs, which often display low volatility levels due to Switzerland’s consistent economy and political stability. In that case, your trades’ dependence on short-term trends or news would be limited since this currency pair rarely fluctuates significantly.

There are many ways to reduce risks in forex trading activities such as adopting stop-loss orders or opt into lower leverage options; choosing a suitable currency pair based on historical volatility levels is one method traders can use for effective and sustainable capital preservation practices since there is an unpredictable future ahead in forex markets.

A friend once lost 30% of his account funds due to mistakes made while trading with highly volatile commodities like gold before pivoting his strategy towards low-volatility currencies like USD/JPY – he learned vital lessons about limiting unnecessary risks since then.

Trading less volatile currency pairs can lead to stable profit margins and consistent profitability, with lower market exposure.

Stable Profit Margins

Maintaining a steady income stream is essential for any trader’s success. Stable profit margins enable traders to attain consistent profitability, protecting their positions against undue changes in market prices. Achieving this requires strategic planning and timing. By investing in less volatile currency pairs, traders can reduce their risk with low market exposure, allowing them to maintain stable profit margins without exposing themselves to significant losses.

Investing in less volatile currency pairs ensures stability in the trading account, as they offer lower risks of loss and require fewer margin requirements. In addition, consistent profits are more likely as these currency pairs experience fewer fluctuations over time than more volatile pairs. Though lower fluctuations can result in smaller profits than highly volatile markets, accumulated gains made over time allow for long-term stability.

Currency traders seeking stable profit margins must consider factors such as spread and commissions, liquidity and potential impact of news and events on the pair’s value. By carefully assessing these conditions before initiating a trade position, traders can protect themselves from financial damage due to unforeseen market activity.

According to Forex School Online, “trading less volatile currencies require patience and discipline.” This statement highlights that creating a profitable strategy involves careful planning using methods such as range trading or hedging.

In summary, stable profit margins are crucial for achieving long-term success in the forex market. Investing in less volatile currency pairs offers reduced risk of losses and higher stability while still providing opportunities for growth. Traders must carefully assess each trade since this method involves multiple considerations before initiating a position. Despite requiring patience and discipline compared to trading highly volatile currencies, discussing this type of approach with others engaged with forex trades can provide additional knowledge about its benefits verses the possible risks involved in its implementation. Less volatile currency pairs not only offer lower risk of losses and stable profit margins, but also lower margin requirements for margin trading and controlled leverage in position sizing.

Lower Margin Requirements

Lower margin requirements can be beneficial for traders engaging in margin trading as it allows for larger position sizing with less capital. This translates to more freedom and flexibility in executing trades with leverage, resulting in potentially higher profits.

By choosing less volatile currency pairs, traders can often enjoy lower margin requirements and minimize the risk of losing their entire account balance due to margin calls.

In addition to lower risk, choosing less volatile currency pairs also presents an opportunity to save on transaction costs associated with spread and commissions. Trading highly volatile pairs often results in wider spreads due to market fluctuations, thus increasing transaction costs. However, by trading less volatile pairs, traders can benefit from tighter spreads and reduced commission fees.

Pro Tip: While less volatile currencies tend to have lower margin requirements, it is important to exercise caution and always make informed decisions when engaging in margin trading. Never overleverage or oversize positions beyond your means or risk tolerance. Before trading less volatile currency pairs, consider factors such as spread and commissions, liquidity, and potential news and events that could affect the currency markets.

Factors to Consider When Trading Less Volatile Currency Pairs

Factors To Consider When Trading Less Volatile Currency Pairs - Which Currency Pairs Are Less Volatile?,

Photo Credits: forexbrokerreport.com by Arthur Sanchez

To get the best from trading low volatility currency pairs, have minimal risk. Remember these factors!

  1. Check the Forex fees and transaction costs by analyzing spread and commissions.
  2. Also look at liquidity in terms of trading volume and market depth.
  3. Lastly, check news and events for risk, what the market does, and the economic calendar.

Spread and Commissions

Spread and Transaction Costs

Forex fees are also referred to as Transaction costs, which include the spread, commission charges, and other expenses incurred while trading. Spread is the difference between bid and ask prices that a broker or dealer offers while selling or buying currency pairs. The spread varies by market conditions, liquidity, and brokerages. Additionally, brokers may demand commissions based on the volume of trading.

In Table 1 below, we compare spreads from different forex brokers for some commonly traded currency pairs. Lower spreads denote reduced transaction costs and higher profitability for traders.

PairsBroker ABroker BBroker C

Besides, liquidity determines how accessible it is to trade at favorable prices without encountering significant slippage when executing orders for currency pairs with low volatility.

Henceforth, Traders should factor in both potential gains and transaction costs when selecting currency pairs to trade.

According to data released by Investopedia,

“Forex fees can add up quickly leading to reduced profitability”, https://www.investopedia.com/terms/f/forex-fee.asp

Trading in low liquidity currency pairs is like swimming in shallow waters, you might get stuck and struggle to move.


Trading Volume and Market Depth:

High liquidity in the forex market is crucial for traders as it enables them to open and close trades with ease. Trading volume refers to the total number of units of currency traded in the market during a particular timeframe, while market depth describes the number of buy and sell orders at different price levels. Liquidity allows traders to buy or sell positions as needed at current market prices without significant price variations. Low liquidity can lead to slippage, which occurs when trading orders are executed at a higher or lower price than expected due to the absence of buyers or sellers in the market. Therefore, when selecting currency pairs to trade, consider ones that offer high trading volume and market depth.

Keep your trading stress levels low by keeping an eye on event risks and the economic calendar when trading less volatile currency pairs.

News and Events

Keeping an eye on the event risk and market reaction is crucial in trading currency pairs. Traders must have a deep understanding of the economic calendar to anticipate potential price movements caused by significant news and events. Trading less volatile currency pairs may reduce the impact of sudden market fluctuations, but being aware of relevant events still matters.

It is important to note that some less volatile currency pairs can become volatile due to unexpected news or events such as Brexit or the COVID-19 pandemic. Therefore, traders should keep their positions under constant monitoring during important events and update their strategies accordingly.

Navigate the currency market with ease using these trading techniques: range trading, carry trade, and hedging strategies for less volatile currency pairs.

Strategies for Trading Less Volatile Currency Pairs

Strategies For Trading Less Volatile Currency Pairs - Which Currency Pairs Are Less Volatile?,

Photo Credits: forexbrokerreport.com by Bradley Robinson

Strategy for trading currency pairs with low volatility: Range Trading, Carry Trade and Hedging. Focus on support/resistance levels.

  • Range trading: consider trading range, interest rate differences and rollover swap.
  • Carry trade: look at interest rate differentials and rollover swap.
  • Hedging: emphasize risk mitigation and portfolio diversification.

Range Trading

Range trading refers to a strategy used by forex traders to profit from currency pairs that do not show significant movements but tend to oscillate between support and resistance levels. This strategy involves buying at the lower end of the trading range and selling at the upper end. With this approach, traders aim to exploit price stability in less volatile currency pairs, which can offer them a consistent source of profits.

To effectively implement the range trading strategy, traders first need to identify currency pairs that exhibit relatively stable price patterns. They then proceed to look for support and resistance levels within which the prices move for an extended period. Once these levels are determined, traders can use technical indicators such as moving averages or Bollinger Bands to determine when it is suitable to enter or exit a trade.

When executing range trading strategies, it’s important for traders to keep an eye on economic and political developments that may have an impact on their chosen currency pair’s stability. They should also pay attention to factors that could cause sudden market fluctuations, such as major global news events.

Range trading is a popular approach among traders who prefer steady profits instead of high-risk high-return ventures. When implemented successfully using well-chosen currency pairs, this strategy can be highly profitable while keeping losses low. Therefore, it is crucial for any prudent trader not to miss out on the benefits of range trading in their portfolio.

Why settle for regular profits when you can carry on trading and earn interest rate differentials with the Carry Trade strategy?

Carry Trade

Expanding on the concept of earning interest rate differentials, the carry trade strategy involves borrowing a low-yielding currency and investing in a high-yielding currency. Traders profit from the interest rate differential and also potentially gain from any exchange rate appreciation. Rollover swap refers to the overnight charge/credit for holding an open position from one trading day to the next.

It is essential to consider the risks associated with carry trades, especially in times of market uncertainty or rapidly changing economic conditions. Traders need to monitor monetary policies closely and be prepared for sharp changes in forex rates, which may lead to significant losses.

Pro Tip: While implementing carry trade strategy, it is essential to ensure that the potential profits outweigh the costs involved, including spread, commission, rollover swap fees, and any other charges related to holding overnight positions.

Prevent losses and diversify your portfolio by hedging with less volatile currency pairs.


Hedging is a risk mitigation tool used to reduce potential losses in currency trading. It involves taking positions that counteract potential losses in other positions, thereby reducing the overall risk of loss. This strategy can help traders manage their portfolio diversification by balancing high-risk trades with low-risk trades.

By identifying the most volatile currency pairs and minimizing exposure to them, traders can better hedge their portfolios by choosing less volatile currency pairs. Additionally, using options contracts to hedge currency positions can provide additional protection against unforeseen events or changes in market conditions.

It is important to note that hedging can also limit potential profits, as it focuses primarily on reducing risks rather than maximizing gains. Traders must carefully consider the costs and benefits of hedging before committing to this strategy.

A true story about the risks of not hedging occurred during the financial crisis of 2008 when several large financial institutions suffered significant losses due to unhedged currency positions. These institutions had exposed themselves to risky assets without proper hedging strategies, resulting in severe declines in share prices and net asset values. This serves as a reminder that proper risk management through hedging is essential for long-term success in currency trading.

Five Facts About Less Volatile Currency Pairs:

  • ✅ Currency pairs involving stable economies and political situations are generally less volatile. (Source: Investopedia)
  • ✅ The USD/JPY currency pair is considered less volatile due to Japan’s low inflation rate and stable economy. (Source: FX Empire)
  • ✅ The EUR/CHF currency pair is historically one of the least volatile, due in part to the Swiss National Bank’s intervention to keep the Swiss franc from appreciating too much. (Source: DailyFX)
  • ✅ The AUD/USD and NZD/USD currency pairs tend to be less volatile because of stable economic and political conditions in their home countries. (Source: IG)
  • ✅ Less volatile currency pairs can still experience sudden spikes in volatility due to unexpected events or news releases. (Source: BabyPips)

FAQs about Which Currency Pairs Are Less Volatile?

Which currency pairs are less volatile?

Answer: Currency pairs that involve major currencies like USD, EUR, JPY, GBP, CAD, AUD, and CHF are generally less volatile compared to emerging market currencies like MXN, ZAR, TRY, etc.

Why are major currency pairs less volatile?

Answer: Major currency pairs are traded more frequently and involve higher trading volumes compared to exotic currencies, which makes them less prone to sudden shifts. Additionally, countries with major currencies are usually more stable politically and economically compared to those with emerging market currencies.

Can exotic currency pairs become less volatile?

Answer: Yes, volatility can change over time, and exotic currency pairs that initially exhibit high levels of volatility can become less volatile over time due to changes in the geopolitical and economic landscape.

Should I only trade less volatile currency pairs?

Answer: Not necessarily, as higher volatility can lead to greater market opportunities for traders and potentially higher profits. It ultimately depends on your specific trading strategy and risk tolerance.

What are the pros of trading less volatile currency pairs?

Answer: Trading less volatile currencies can provide a sense of stability and predictability, making it easier to plan and execute trades. Additionally, less volatile currencies are less prone to sudden shifts, reducing the risk of significant losses.

What are the cons of trading less volatile currency pairs?

Answer: Trading less volatile currencies may result in lower potential profits compared to trading more volatile currencies. Additionally, less volatile currencies may require longer holding periods to realize profits, which can tie up trader funds for longer periods.

Phoebe Hall

I started investing and got involved with the money markets around 2019. This isn't a full time job for me, more so a hobby and an industry I'm incredibly passionate about. Alongside speculating within the markets, I write content financial blogs in the industry.

Recent Content