The foreign exchange (forex) market is the largest and most liquid market in the world with over $6.6 trillion traded daily. With such massive trading volume, there are many opportunities for traders to profit from price movements. However, some currency pairs tend to have larger price swings than others, providing greater potential for gains – and losses. These are known as the most volatile forex pairs.

Volatility indicates how much and how quickly the price of a currency pair moves. High volatility means there are frequent and substantial price movements, while low volatility currency pairs have more modest fluctuations. Traders favor volatile pairs for short-term trading strategies like day trading and scalping, as bigger price swings allow for larger profit targets. However, high volatility also leads to increased risk, so managing that risk is crucial.

This guide examines the most volatile forex pairs and what makes their prices fluctuate so drastically. We’ll also look at effective strategies to trade these pairs and manage the hazards of their potentially explosive moves.

What Determines Volatility in Forex?

Several factors can impact the volatility levels of currency pairs. The most influential are:

Economic and Political Factors

Major news events, data releases, elections, wars, and other geopolitical happenings can cause extreme volatility. Surprises drive the largest price spikes. For example, unexpected interest rate decisions from central banks, unforeseen election outcomes, and sudden conflicts can all trigger huge swings. Traders must closely follow current events impacting currencies.

Interest Rate Differentials

The difference between interest rates of the currencies in a pair impacts volatility. Wider differentials lead to bigger price swings. This is because interest rates affect the carry trade, which involves borrowing from low-yield currencies and investing in higher yield ones. Changing rate spreads alter carry trade appeal.

Trading Sessions

Volatility often increases during key trading sessions when volume skyrockets. The London-New York overlap sees peak volatility as both centers are online. When Tokyo opens, Japanese Yen pairs see surging trading activity. And when Sydney and Asia open, pairs like AUD/USD experience spikes.


Illiquid, exotic pairs with lower trading volume tend to be more volatile. Prices face larger spreads and can gap more easily with less liquidity. In contrast, the major pairs with the highest volume typically have lower volatility. Their substantial liquidity makes prices harder to move.

The Most Volatile Currency Pairs

Now that we’ve reviewed the drivers of volatility, let’s examine today’s most volatile forex pairs.


The British Pound-Japanese Yen pair has earned its reputation as the most volatile forex pair. On a typical day, it has an average daily range of 160 pips!

Several factors contribute to the huge price swings of GBP/JPY:

  • Interest Rate Differential – With generally low interest rates in Japan, the interest rate spread between GBP and JPY widens, causing volatility.
  • News Events – As major economies, both the UK and Japan have frequent impactful news events that affect the currencies.
  • Intervention Fears – Concerns over potential Bank of Japan interventions due to yen weakness at times adds uncertainty.
  • Emerging Markets – Demand for the safe-haven yen fluctuates with emerging market sentiment.

With its perfect storm of volatility drivers, GBP/JPY offers huge profit potential for short-term traders but also substantial risk. Respect your stops and use proper risk management trading this pair!


Featuring two currencies with vastly differing volatility levels, EUR/NZD is another favorite of active traders. The Euro is stable and lower volatility against the New Zealand Dollar, which is more volatile with exposure to commodities and emerging markets.

Key factors making EUR/NZD a volatile pair include:

  • Commodities – NZD has high sensitivity to agricultural exports like milk, meat, and wool. Global demand fluctuations causes volatility.
  • Central Banks – The ECB and RBNZ have divergent monetary policies. Rate changes widen spreads and affect prices.
  • Yields – With New Zealand rates higher, the interest rate differential leads to choppy price action.

EUR/NZD sees attractive daily ranges averaging 90 pips. But liquidity is lower which increases spreads and the risk of slippage. Manage risk smartly when trading this pair.


The British Pound-Swiss Franc cross is one of the more volatile minor pairs. Both currencies share the distinction of not being pegged to the Euro, allowing greater fluctuation between them.

What makes GBP/CHF so volatile?

  • Divergent Monetary Policy – The BOE and SNB take very different approaches to rates and economic conditions. This fuels price movements.
  • Risk Sentiment – CHF has safe haven appeal that causes jumps in times of fear. GBP more risky. Shifts in risk on/off impact volatility.
  • Lack of Liquidity – As a less traded minor pair, GBP/CHF suffers larger spreads and gaps. This amplifies volatility.

With pip swings averaging 140 per day, GBP/CHF offers opportunities for short-term gains. But lower liquidity can exacerbate risk on this pair.


For explosive volatility, look no further than the USD/TRY pair. With average daily ranges of 350 pips, prices can catapult higher or lower very rapidly.

Here’s what leads to the frequent price shocks:

  • Emerging Market – As an emerging market economy, Turkey faces higher volatility from financial inflows/outflows.
  • Geopolitics – Regional instability and conflicts add uncertainty that causes aggressive TRY selling at times.
  • High Inflation – Turkey’s chronically high inflation sparks currency depreciation and shifting monetary policy.
  • Lira Intervention – Heavy-handed central bank intervention in TRY aiming to control prices instead increases volatility.

While enticing for short-term gains, USD/TRY can quickly lead to outsized losses if risk isn’t controlled. Use extreme caution trading this exotic pair!


The Australian Dollar-Japanese Yen pair combines a commodity currency with a safe haven currency for elevated volatility. Its average daily range reaches 120 pips.

Several factors contribute to the frequent fluctuations:

  • Divergent Economies – Varying growth levels between Australia and Japan impact monetary policy and rates.
  • Commodities – Big swings in metals and energy that drive AUD exports create volatility.
  • Risk Appetite – Shifts between risk-on and risk-off benefitting either currency lead to price surging and plunging.
  • Intervention Fears – Concerns of BOJ action to weaken JPY adds uncertainty at times.

AUD/JPY’s volatility provides opportunities but hazardous volatility requires managing risk with care. Use trailing stops and reasonable position sizing.


Scandinavian currencies like the Swedish Krona are vulnerable to sizeable moves against the US Dollar. USD/SEK is no exception, with average daily ranges of 100 pips.

Several factors lead to regular volatility:

  • Yield Differentials – Interest rates are low in Sweden, making for a wide gap versus the US that sparks fluctuations.
  • Risk Sentiment – Krona strength fluctuates significantly based on shifts between risk aversion and appetite.
  • Inflation Targeting – Riksbank policy causes spikes following rate decisions reacting to CPI.
  • Energy – Sweden’s exposure to oil as a producer and exporter can fuel energy-driven volatility.

USD/SEK offers opportunities for short-term gains but economic exposure for Sweden also raises volatility risks. Trade cautiously.


While not the most volatile pair, GBP/USD still sees significant daily ranges averaging 80 pips. The pairing of two major currencies makes it popular for volatility traders.

Several factors lead to GBP/USD’s frequent fluctuations:

  • Central Bank Divergence – Contrasting approaches by the Fed and BOE to inflation and rates causes price swings.
  • Economic Disparity – Varying growth and data between the US and UK economies creates volatility.
  • Liquidity – High daily volume and tight spreads makes GBP/USD attractive for volatility trading.
  • Geopolitics – Economic uncertainty from Brexit and other events adds to currency volatility.

With liquidity and manageable volatility, GBP/USD can be a good pair for newer volatility traders to start with.


The world’s most traded currency pair, EUR/USD also sees healthy daily movement averaging 70 pips. While not the biggest swings, it offers several benefits for volatility traders.

Factors causing frequent EUR/USD price action include:

  • Economic Size – The huge scale of the US and Eurozone economies leads to regular developments driving volatility.
  • Monetary Policy – Differing Fed and ECB approaches to inflation and rates creates fluctuations.
  • Liquidity – Massive daily volume provides tight spreads critical for volatility strategies.
  • Risk Premiums – Shifts in euro risk premiums relative to the US dollar add to volatility.

With tight spreads, ample liquidity, and manageable volatility, EUR/USD is an excellent pair for volatility trading.

Strategies for Trading Volatile Forex Pairs

Now that we’ve reviewed the most explosive forex pairs, let’s examine profitable strategies to trade them:

Day Trading

Day trading thrives on volatility. It involves closing all positions before the daily market close. Volatile pairs like GBP/JPY allow day traders to capitalize on intraday swings. Manage risk with small position sizing and smart stop losses.


Scalping aims to profit from small price movements. Volatile pairs like EUR/NZD provide an ideal environment for scalpers seeking to capture multiple small gains throughout the day. Use tight stops to minimize risk on this fast-paced strategy.

Breakout Trading

Volatile pairs frequently see strong breakouts and momentum surges. Using tactics like breakout pullback entries allow traders to benefit from these explosive moves on pairs like AUD/JPY. Set stops to limit damage if momentum stalls.

News Trading

Major economic news and data releases can spark huge volatility on related currency pairs. Expect fast-paced price action around events on volatile pairs like USD/TRY. Manage risk around news properly and scale out of trades incrementally.

Range Trading

When volatile pairs oscillate in ranges during calmer periods, range trading excels. Define clear support and resistance levels, then target entries near range extremes on pairs like USD/SEK. Use stops at range borders.

Managing Risk with Volatile Pairs

While volatile forex pairs hold exciting profit potential, their extreme swings also pose significant risk if not traded carefully. Follow these tips to improve risk management:

  • Use prudently small position sizes relative to your account size so volatility doesn’t wipe out your capital.
  • Decide on stop losses before entering trades to limit downside. Use wider stops or reduce size where volatility is extreme.
  • Scale out of winning volatile pair trades incrementally to take risk off the table. Avoid trying to pick exact turning points.
  • Focus on the short term and don’t overtrade. Volatility can quickly reverse strongly, so be nimble.
  • Diversify positions across various volatile pairs to avoid concentrating risk excessively.
  • Balance volatile pair trading with solid risk management and you can profit immensely from their large price swings.


Volatile currency pairs provide traders with tremendous profit-making potential thanks to their frequent and substantial price movements. However, with great opportunity comes great risk if appropriate precautions aren’t applied.

Use smart position sizing, place logical stops, and scale out of winning volatile trades while diversifying across various volatile instruments. Risk management is crucial to surviving the hazards posed by explosive forex pairs.

By mastering volatile forex pair strategies and managing risks, traders can consistently extract gains from these exciting markets. Just remember, volatility cuts both ways so always trade with caution.