Five foreign currencies you should consider investing in

Five foreign currencies

Foreign currencies are a dynamic global marketplace. With the right strategy, you can capitalise on price movements across different currency pairs. 

Whether you’re a seasoned veteran or a beginner using a funded trading account for risk-free learning, choosing the right currencies is a crucial part of this process. 

Below are five options that offer compelling advantages in today’s market.

1. The Euro

The euro (EUR) remains one of the most actively traded currencies, offering deep liquidity and consistent price movements. As the official currency of the Eurozone, it reflects the economic health of leading European economies, including Germany and France.

When the European Central Bank signals changes in monetary policy, EUR pairs tend to react, providing opportunities in both bullish and bearish markets.

2. Japanese yen

The Japanese yen (JPY) plays a central role in forex trading, widely recognised as a safe-haven currency. During periods of economic uncertainty, institutional traders shift capital into the yen, strengthening its value against riskier assets.

The Bank of Japan’s (BoJ) monetary policy and US Federal Reserve rate decisions are key drivers of volatility in this pair. When US interest rates rise, USD/JPY typically strengthens, while dovish policy from the BoJ can lead to further yen depreciation. 

3. British pound

The British pound (GBP) is known for its volatility, making it a preferred currency for traders looking for strong intraday price movements. The GBP/USD pair frequently experiences sharp price swings, with Bank of England interest rate decisions playing a key role in driving the action. 

Unlike the euro, which often trends steadily, the pound is more sensitive to political and economic developments. It’s recommended to employ effective risk management strategies like stop-loss strategies when trading GBP pairs.

4. Australian dollar

The Australian dollar (AUD) is heavily influenced by global commodity prices, particularly gold and iron ore. As a result, AUD/USD tends to react to shifts in global demand for raw materials. Traders who monitor commodity price trends can gain an additional edge when trading this pair.

The Reserve Bank of Australia (RBA) also plays a key role in determining AUD price movements. Australia has historically maintained higher interest rates compared to other developed economies, making the AUD attractive for carry trades. 

5. Canadian dollar

The Canadian dollar (CAD) is another commodity-linked currency, closely tied to the performance of the oil market. Canada is a major oil exporter, and fluctuations in crude oil prices often drive CAD value. As one of the most traded currencies, CAD is also influenced by broader economic factors such as trade relations, particularly with the U.S., its largest trading partner. 

USD/CAD is a widely traded pair, responding to both oil market conditions and monetary policy from the Bank of Canada (BoC). Rising oil prices typically strengthen CAD, while falling prices can push USD/CAD higher. Additionally, CAD is sensitive to global risk sentiment, often performing well during periods of economic optimism. 

Traders should also monitor Canada’s employment data and GDP growth, as these indicators can significantly impact the currency’s direction. The BoC’s interest rate decisions further play a pivotal role, with rate hikes typically boosting CAD and cuts weakening it. Given its dependency on commodities and external trade, CAD trading requires a keen eye on both domestic and international economic developments. Effective risk management, such as using stop-loss orders, is essential to navigate the currency’s inherent volatility.

Final thoughts

Wherever you are in your trading journey, an informed approach to currency selection can help you maximise your potential.

The euro offers stability and the yen presents safe-haven opportunities, whereas the pound delivers volatility for active traders. Meanwhile, the Australian and Canadian dollars provide exposure to global commodity trends, creating strong potential if you’re willing to follow macroeconomic developments.

Whichever market conditions align with your strategy, choosing the right currency can help you trade the markets with confidence.