[Infographic] Top Currencies to Watch and Invest in Today

The Philippine economy has grown through the years, but for those looking to grow and diversify their portfolio further, investing in other high-performing currencies is the perfect way to do so. The global foreign exchange market is the most liquid financial market, making it a risky but rewarding venture for those who want to expand their portfolio.

The market has an average daily volume over $5 trillion, is a great way to diversify, operates all day for longer trading time compared to other ventures, and is a low-cost exchange that does not involve paying commission. Though, it’s also highly risky, as it is high-leverage, moves in tiny increments, and is extremely volatile.  

Both seasoned investors and newbie forex traders can learn a thing or two from studying other currencies before dipping their toes in the water. Here are the best notes you should put your money in for this year.

1. United States Dollar (USD)
   
   Central Bank: Federal Reserve System (Fed)
   
   Also called the greenback, the USD is the denomination of the country with the largest economy. The central bank Federal Reserve has a particular focus on the branch called the Federal Open Market Committee (FOMC). The FOMC manages open market operations, monetary policy, and interest rates.
   
   The USD is influenced by economic fundamentals like the GDP and manufacturing and employment reports, as well as by the Fed’s announcements on interest rate policy. In 2018, the USD had its best annual performance since 2015, with an advance of 5% on the index and gains against its currency rivals.
   
   This makes 2019 a good year to invest in USD. Russ Mould, investment director at online trading platform AJ Bell, also believes that the Fed is “likely to increase interest rates again and withdraw quantitative easing.”
   
   For Filipinos, investing in USD is nothing new, as it remains to be the most globally accepted currency. However, through dollar-dominated funds like BPI-Philam’s Dollar Protect Plus, Filipinos now have more options available to them for their dollar investment.
   
   
2. European Union Euro (EUR)
   
   Central Bank: European Central Bank (ECB)
   
   The ECB is the central bank of the 19 member countries of the Eurozone (Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain).
   
   It is responsible for making monetary policy decisions and holds the right to issue banknotes when necessary. They do this by working towards price stability with minor guarantees to general economic policies, instead of maximizing employment or making long-term interest rates stable.
   
   Against the USD, EUR tends to be a slower currency, trading between 30 to 40 pips (point in percentage, or the smallest change in currency quote) on a day with more volatile swings of up to 60 pips. Gaurav Kashyap, head of futures at EGM in Dubai, believes that the EUR is one to watch if the ECB increases interest rates, which ECB President Mario Draghi may do before he steps down in October.
   
   In any case, 2019 should be a better year for growth, as current low-interest rates, weak currency, and low oil prices provide a boost to the economy. Trade may scale back up to 1.17 by the end of the year.
   
   
3. Japanese Yen (JPY)
   
   Central Bank: Bank of Japan (BoJ)
   
   Established in 1882, the BoJ governs monetary policy, currency issuance, money market operations, and data and economic assessment for the third-largest economy. The Monetary Policy Board works with the current administration towards fiscal stability.
   
   The JPY tends to utilize carry-trade, offering low-interest rate to pit against higher-yielding currencies. This results in erratic underlying trends that push traders to technical perspectives for the long term. Average daily ranges are 30–40 pips with a maximum of 150 pips.
   
   The JPY has been regarded as a safe haven for investors, mainly due to the country’s status as the largest creditor. Traders use it for capital gains and hedging. Devesh Mamtani, head of investments and advisory at Century Financial Brokers Dubai, believes that the JPY is likely to outperform this 2019 given the rise it has experienced over the last three years.
   
   
4. British Pound (GBP)
   
   Central Bank: Bank of England (BoE)
   
   BoE’s Council of Directors is the governing body of the bank and appointed by the Crown. It establishes the Monetary Policy Committee (MPC). The Chancellor of Exchequer, meanwhile, appoints its chair and deputy chair. The MPC decides on the interest rates and monetary policy, with a focus on total price stability in the economy.
   
   The benchmark of consumer price inflation is set at 2%; if this is compromised, the governor should notify the Chancellor of Exchequer through a letter. This could mean an increase in the probability of contractionary monetary policy.
   
   The currency GBP (also called Sterling or Cable) is more volatile than the EUR with 100-150 pips throughout the day. Volatility is mainly due to changes in cross currencies, with traders focusing on GBP/JPY or GBP/CHF.
   
   This 2019, the GBP/USD may jump to 1.30 if the Parliament approves the completed Brexit deal, with many analysts believing that it could be a top performer if the UK avoids the worst. However, if the UK leaves the EU through a hard Brexit, it may drop to 1.23. This can be tricky for investors as the currency could move sharply in either direction.
   
   
5. Swiss Franc (CHF)
   
   Central Bank: Swiss National Bank (SNB)
   
   The SNB is a governing body with both private and public ownership, as it is a corporation under special regulation. Because of this arrangement, economic and financial stability policies are emphasized as dictated by the governing board.
   
   It also has a smaller governing body, with monetary policy decisions created only by three major bank heads quarterly. They also form the band (plus or minus 25 basis points) for the interest rate. CHF is the sixth-most traded currency in the world, making it a gold standard that provides stability against other major currencies.
   
   In the last five years, the USD/CHF has fluctuated between 0.9600 and 1.0000, which is favorable to the forex market as it shields their assets from other currencies instead of making a quick profit. Similar to EUR, CHF does not swing a lot in a day, with an average daily range of 35 pips.
   
   
6. Canadian Dollar (CAD)
   
   Central Bank: Bank of Canada (BoC)
   
   BoC’s goal is to focus on low and stable inflation, financial stability, and efficient management of government funds and public debt, which can make CAD a safe and secure currency. It is also sometimes treated as a corporation, with the Ministry of Finance holding shares.
   
   BoC tends to be more hawkish rather than accommodating to deviations in prices as their inflationary benchmark is only at 2%. Analysts believe that the CAD could be the top performing currency for 2019, considering that the country’s unemployment is at a 40-year low. Business investments are believed to increase when the United States-Mexico-Canada Agreement is ratified.
   
   In addition, Prime Minister Justin Trudeau’s plan to cut taxes and red tape should further boost the economy. BoC may also raise rates from 1.75% to 2.25%. Considering these factors, plus the fact that the prices of crude oil (Canada’s major export) are up by 13%, 2019 may be a good time to invest in the CAD.
   
   
7. Australian Dollar (AUD)
   
   Central Bank: Reserve Bank of Australia (RBA)
   
   The RBA looks at price stability and economic strength as its long-term plan, while also working toward target inflation of 2%. Many carry traders look at the AUD for its high interest rates in the major global markets, sometimes even offering the highest yields among the seven major currencies. As a result, AUD is volatile, especially if there’s a deleveraging effect.
   
   However, some analysts suggest that the AUD may underperform after house prices in Sydney fell 10% with further drops expected, as this creates a negative wealth effect that may curb personal spending.
   
   This doesn’t mean, though, that the AUD is no longer for forex investment as the nation’s economy is still doing well. It also helps that the currency is strongly connected to precious metals and the prices of gold, silver, and steel.
   
   
8. South African Rand (ZAR)
   
   Central Bank: South African Reserve Bank (SARB)
   
   The South African central bank is in charge of achieving and maintaining price stability, including intervening in forex markets if needed. In certain situations, the SARB is also a creditor, a clearing bank, and a major custodian of gold.
   
   Interestingly, SARB is a privately owned entity with more than 600 shareholders, albeit only holding less than 1% of the total number of outstanding shares. This ensures that the interest of the economy precedes that of the individual.
   
   The ZAR is seen as relatively volatile with an average daily range of 1,000 pips. However, when translated into dollar pips, the movements are almost similar to the average of the GBP in a day. This makes the ZAR a great trade against the USD, especially considering its carry potential. Traders also consider ZAR’s relationship to gold and platinum, as the country is a world leader when it comes to exports of these metals.