Forex Industry
by Lucas Bedwell on June 21st, 2023

Unraveling the Wild World of Forex: Exploring the Most Unstable Currency Pairs

In the vast arena of global currency trading, the volatility of certain currency pairs has long fascinated and enticed traders seeking high-risk, high-reward opportunities. The dynamic nature of the foreign exchange market makes it a playground for those daring enough to navigate the unpredictable tides of currency fluctuations. While stability can be a valued characteristic for some, today we delve into the realm of instability, exploring the most tempestuous currency pairs that test the mettle of forex traders. This article aims to shed light on the factors that contribute to the volatility of currency pairs, uncover the risks involved, and offer insights into how traders can potentially capitalize on these rollercoasters of the forex world.

Top Unstable Currency Pairs for FX Trading

USD/TRY (United States Dollar/Turkish Lira)

Trading with USD/TRY (United States Dollar/Turkish Lira) is known to be a highly volatile and challenging endeavor in the forex market. Several factors contribute to its instability and the potential decrease in profitability. Firstly, Turkey’s political landscape and economic stability play a significant role.

The value of the Turkish Lira against the US Dollar can be rapidly influenced by political events, alterations in policies, and geopolitical strains.  Secondly, Turkey’s high inflation rates and fiscal challenges create uncertainty and erode investor confidence. Additionally, the country’s reliance on foreign capital inflows and external debt further exposes the currency to market sentiment and global economic conditions. Lastly, limited liquidity and relatively low trading volumes in the USD/TRY pair can amplify price swings and make it susceptible to sudden spikes or erratic movements. These combined factors make trading USD/TRY a complex and risk-laden venture, requiring careful analysis and risk management strategies.

GBP/JPY (British Pound/Japanese Yen)

GBP/JPY (British Pound/Japanese Yen) is renowned for its high volatility and instability, making it a challenging currency pair for forex traders. Several factors contribute to its frequent and significant fluctuations. Firstly, both the British Pound (GBP) and the Japanese Yen (JPY) are major currencies with their own unique economic and political influences. Changes in interest rates, economic indicators, and monetary policies in either country can rapidly impact the GBP/JPY pair. Additionally, geopolitical events, such as Brexit-related developments, can introduce significant uncertainty and volatility. Furthermore, GBP/JPY is influenced by global market sentiment, as both currencies are actively traded and considered in risk-on/risk-off trading strategies.

Traders should also note that GBP/JPY tends to exhibit extended intraday price movements, making it attractive for short-term speculators but requiring careful risk management due to its potential for sharp reversals. Given these factors, traders should exercise caution and closely monitor market conditions when engaging in GBP/JPY trades.

NZD/JPY (New Zealand Dollar/Japanese Yen)

Trading with the NZD/JPY (New Zealand Dollar/Japanese Yen) currency pair may not be the optimal choice for several reasons, considering its inherent instability. Firstly, the New Zealand Dollar (NZD) is heavily influenced by commodity prices, particularly agricultural exports like dairy and meat. Fluctuations in global commodity markets can lead to unpredictable movements in the NZD, adding an element of volatility to the currency pair. Secondly, the Japanese Yen (JPY) is often sought after as a safe-haven currency during times of market uncertainty, resulting in its tendency to appreciate rapidly.

This “flight to safety” dynamic can cause sharp and unpredictable swings in the NZD/JPY pair. Furthermore, the economic relationship between New Zealand and Japan is relatively limited, leading to lower liquidity and potentially wider bid-ask spreads, making it more challenging to execute trades with precision. Considering these factors, traders need to exercise caution and employ robust risk management strategies when dealing with the NZD/JPY currency pair.

AUD/JPY (Australian Dollar/Japanese Yen)

Forex trading with AUD/JPY (Australian Dollar/Japanese Yen) may not always be the most profitable choice due to the pair’s inherent instability and fluctuating prices. Multiple elements contribute to this instability. To begin with, the Australian Dollar (AUD) demonstrates a strong correlation with commodity prices, especially iron ore and energy resources.

Fluctuations in global commodity markets can lead to sudden shifts in the AUD’s value against the Japanese Yen (JPY), making price movements in AUD/JPY unpredictable. Secondly, the Japanese Yen is often sought after as a safe-haven currency during times of market uncertainty, resulting in its tendency to appreciate.

This flight to safety dynamic can cause sharp reversals and erratic movements in AUD/JPY. Furthermore, both Australia and Japan are export-oriented economies, which exposes the pair to global trade dynamics and economic conditions, further adding to its instability. Considering these factors, traders should exercise caution and implement effective risk management strategies when trading AUD/JPY to mitigate potential losses.

ZAR/JPY (South African Rand/Japanese Yen)

ZAR/JPY (South African Rand/Japanese Yen) is widely regarded as an unstable currency pair and may not be the ideal choice for forex trading. Several factors contribute to its volatility and the associated risks. Firstly, the South African Rand (ZAR) is highly exposed to political and economic uncertainties, including social unrest, policy changes, and fluctuations in commodity prices, particularly gold and platinum. These factors can swiftly impact the value of the ZAR against the Japanese Yen (JPY) and create unpredictable market movements. Secondly, the Japanese Yen is often sought after as a safe-haven currency during times of market turmoil, leading to potential rapid appreciation that can exacerbate volatility in the ZAR/JPY pair.

Additionally, the relatively lower liquidity and trading volumes in this pair can result in wider bid-ask spreads, making it more challenging to execute trades with efficiency. Given these considerations, traders should approach ZAR/JPY with caution and implement robust risk management strategies to navigate its inherent instability.




By Lucas Bedwell

With 3 years of trading experience across Forex, stocks, and cryptocurrencies, Lucas Bedwell has honed his market insights. His close connection to financial markets allows him to craft compelling copy, offering readers valuable perspectives and analyses that reflect his deep understanding of trading dynamics.

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