The top 10 most volatile currency pairs in 2023

The forex market is prized for its high volatility, which creates both ample trading opportunities and high risks. There are several factors that determine volatility in a currency: liquidity, time of day, geopolitical conflicts, economic stability and the sentiment of forex traders.

In this article we consider all of those factors to rank the most volatile forex pairs, prioritizing major and minor pairs that have higher liquidity than rarely traded exotics.

Volatility in forex

Volatility in forex is a measure of the frequency and extent of changes in the value of a currency. In forex, a currency pair is described as having high or low volatility depending on the frequency and degree its value deviates from the average.

Volatility can also be thought of as the level of fear displayed by traders. When traders are uncertain about a currency’s true value amidst economic news, its price tends to swing erratically.

Because it’s so fickle, it’s important to regularly measure volatility. Some key methods include applying indicators to your charts such as the average true range (ATR), the relative strength index (RSI) and Bollinger bands.

Most volatile currency pairs

The following table ranks the most volatile major and minor currency pairs measured by daily variation in both pips and percentage change over the past 20 weeks.

But because volatility fluctuates constantly, it can be difficult to pin down the absolute most volatile currency pairs. So below, we’ve handpicked FX pairs of majors, minors and exotics that generally display high volatility.

Major FX pairs

Majors are forex pairs including the US dollar and six other currencies which make up the vast majority of traded pairs. While EUR/USD boasts the most trading volume by far, these three commodity currency major pairs, AUD/USD, CAD/USD and NZD/USD are the most volatile major pairs and as such received a lot of interest.

AUD/USD

AUD/USD has some of the highest trading volumes of all volatile FX pairs because it includes the US dollar. Australia is one of the largest exporters of commodities like coal and iron, so its economy is heavily influenced by the current state of these markets. The best time to trade this major pair is actually during the London session, perhaps because of the influence of global financial activity across the Tokyo, London and New York sessions.

CAD/USD

This major pair highlights the changes in Canada’s commodity economy compared to the US dollar. USD functions a bit like a benchmark in these major pairs. 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.

NZD/USD

NZD is another commodity currency. It’s influenced heavily by New Zealand’s agricultural exports: milk, eggs, meat and timber. New Zealand exports mostly to nearby countries including China and Australia, meaning there are few economic factors to tie the currency to USD. When paired together, the currencies represent economies on opposite sides of the world that rely on different economic drivers, no less.

Minor FX pairs

Minor currencies include cross pairs of any two currencies in major pairs except for USD. While they include some of the world’s largest economies, the combination of economic upheaval in older economies like Japan and the European Union with the volatile nature of commodity currencies makes these pairs more volatile than majors.

AUD/JPY

The Australian dollar and Japanese yen pairing is consistently one of the most volatile currency pairs. AUD is a commodity currency whose value is driven by the country’s mineral and metal exports; the Japanese yen is seen as a premiere safe-haven currency due to the country’s long-running low interest rates. Traders tend to flock to the yen during market turbulence, but not the Aussie dollar.

Both currencies are most active during the Tokyo session, which overlaps with the Sydney session. The pair also represents two of the largest economies active during the session, while many other global markets are relatively dormant.  

NZD/JPY

The New Zealand dollar and Japanese yen pairing is similar to AUD/JPY. While the yen moves slowly as a stable and popular reserve currency, the New Zealand dollar experiences a lot of price fluctuations. Against a more volatile currency, the NZD has a chance of moving in the same direction, cancelling each other out and nullifying possible volatility. So, a volatile currency paired with a stable currency like JPY creates the most space for price fluctuations to trade around.

EUR/GBP

The British pound and euro pair are two of the world’s most traded currencies and make up a large portion of currency reserves. However, post-Brexit a lot of volatility has occurred in this pairing as economic conditions widen between Britain and the European Union.

The strengths of the euro 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.

CAD/JPY

The Canadian dollar and Japanese yen are another pair featuring a commodity currency with the yen. Japan as a high-industrial island nation is heavily dependent on oil and its prices, while Canada is a significant oil exporter.

While Canada doesn’t export much of its oil to Japan, the price of oil strongly affects both economies in different ways, creating volatility in the CAD/JPY exchange rate. In other markets, Canada and Japan do have significant trade relations, making the exchange rate even more volatile.

GBP/AUD

The British pound and Australian dollar reflect two economies with vastly different exports and separate trading partners. AUD is a commodity currency, and a large portion of the country’s trade is with China and other Asian countries. Britain on the other hand does a majority of their trading with the US and European nations.

In a roundabout way, worsening trade relations between the US and China affect both Britain and Australia. As AUS becomes more volatile when China’s economy struggles, the pound strengthens in correlation to USD stability.

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Exotic FX pairs

Exotic forex pairs consist of one major currency and that of a lower trading volume. Most of these pairs include a small or developing economy paired with USD, as the dollar gives more liquidity to these pairs than other major currencies. These pairs have lower liquidity and wider spreads compared to more popular forex pairs. This makes them risky to trade and highly volatile.

USD/ZAR

The United States dollar and South African rand pairing revolve around the value of gold. Gold and other precious minerals are some of South Africa’s top exports, and gold is priced in USD. So, when the US economy strengthens, it detracts from gold’s price and by association the value of the rand.

Beyond gold, South Africa has a turbulent economy struggling with energy and infrastructure crises. USD is seen as one of the most stable currencies, allowing the rand’s instability to create volatility in its currency pair.

USD/KRW

This pair represents the exchange rate between the US dollar and South Korean won. South Korea is the United States’ sixth-largest trading partner, exporting automobiles, electronics, steel and petroleum.

The demand for these exports hinges on the current economic growth of importing countries. This unstable demand causes the value of KRW to fluctuate against USD enough to create high volatility in the forex market.

USD/BRL

The US dollar and Brazilian real pair represents the exchange rate between the two countries. Like South Africa, Brazil is an emerging market with a turbulent economy that can undergo political scandals.

Both the former president of Brazil Jair Bolsonaro and the current president Lula da Silva have been embroiled in corruption scandals that impact the entire national economy. Combined with the struggle of developing a commodity export-based economy, the real’s value displays a lot of volatility against the stable USD.

USD/TRY

The US dollar and Turkish lira pits another emerging economy against USD. Turkey has experienced social and political upheaval in recent years which has caused the lira to steadily decline since 2019.

When compared to the stable US dollar, the exchange rate between the two rapidly fluctuates. The lira is an exotic currency and isn’t traded much in the forex market, it’s more popular among traders than other thinly traded currencies like the Iraqi dinar and Thai baht.

USD/MXN

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. The proximity fosters a lot of trade between the two countries.

Mexico mainly exports machinery, steel, electronics and petroleum to the US. Because so much of the Latin country’s trade is with the US, the exchange rate of USD/MXN is very reactive to disruptions in trade or fluctuations in USD.