What currencies should I choose to trade

What currencies should I choose to trade


There are a wide variety of FOREX currency pairs. To engage in FOREX trading, investors generally choose to start with major currency pairs. Major currency pairs refer to those involving the US dollar. The most popular currency pairs are EUR/USD, USD/JPY, etc.

This is because the countries represented by the currency pairs have great international influences and high trading volumes. The currencies are highly liquid in the market and have dramatic volatility. There are frequent major economic news and data releases (for example: NFP, inflation rate, and central bank policy) for investors to analyse currency trends. Therefore, it will be relatively simple for investors to start with these currency pairs.

Let’s look at the influencing factors of currency prices

As a historically proven safe haven currency, the US dollar, Japanese yen and Swiss Franc are strong and often chased by capital, especially in financial market fluctuations or wars and terrorist attacks period.

  • The US dollar is the dominant international currency, accounting for more than 40% of the global foreign exchange market's traffic, with high liquidity;
  • Japan has a long-term low interest rate and a large number of overseas asset positions;
  • Switzerland is a permanent neutral country with a strict bank secrecy system and is considered the safest place in the world.

These three safe haven currencies have the characteristics of rotation and substitution in the financial market.

For example, the Japanese yen was one of the most important safe haven currencies during the global financial crisis and the European debt crisis, but the occurrence of the earthquake in Japan made the Swiss Franc more popular. However, only eight months later, the Swiss central bank reset the exchange rate between the euro and the Swiss franc, making the US dollar as the no.1 safe haven currency of choice. The brexit referendum at the end of June directly led to the fall of the pound and euro, and as the main currency next to the dollar and euro, the yen once again became a hot safe haven currency.

In foreign exchange trading, investors should seize the market trading opportunity according to the political and monetary policies of the safe currency countries.