2026 Foreign Currency Allocation Guide: What foreign currencies are suitable to buy now for steady income growth

Looking to grow your assets through foreign currencies in the current economic environment? What foreign currencies are suitable to buy now has become a top concern for many investors. In 2025, central banks worldwide are intensively adjusting their policies, creating an unprecedented environment where exchange rate markets present both opportunities and risks. This article will analyze the current market situation, currency characteristics, real-time trends, and specific allocation strategies to help you develop a comprehensive foreign currency investment map.

Central Bank Policy Shifts Bring New Opportunities for Foreign Currency Investment

Over the past year, major central banks around the world have significantly changed their policy directions. The Federal Reserve, after a series of rate cuts, has adopted a more cautious stance; the European Central Bank maintains a relatively accommodative approach; the Bank of Japan faces a complex situation regarding rate hikes; and the Swiss National Bank has garnered attention due to a weakening dollar.

These policy divergences have resulted in noticeable currency fluctuations globally. Some safe-haven currencies have appreciated due to capital flight, commodity currencies have fluctuated with commodity prices, and policy-driven currencies have experienced volatility based on central bank expectations. In such a market environment, both opportunities and risks in foreign currency investments are amplified.

For Taiwanese investors, exchange rate movements between the New Taiwan Dollar and major currencies like USD, JPY, and AUD directly impact foreign currency investment returns. As interest rate differentials narrow and exchange rate volatility increases, learning to select suitable currencies based on current market conditions becomes especially important.

Four Types of Currency Characteristics: How Should Beginners Choose?

The 12 mainstream currencies in the foreign exchange market are not equal; they are influenced by different factors and carry distinct risk profiles. Understanding currency classification is the first step in making appropriate allocations.

Policy-Driven Currencies: USD and EUR

These currencies’ exchange rates are highly correlated with central bank policies. The US dollar, as the global reserve currency, often influences the entire forex market. Every Federal Reserve rate decision triggers a chain reaction. The euro reflects the European Central Bank’s policy stance; given the EU’s large economic scale, EUR movements are crucial for investors.

Investing in these currencies requires closely monitoring central bank meetings, inflation data, and economic outlook guidance. They tend to have higher short-term volatility but offer the most liquidity, suitable for experienced investors who can tolerate fluctuations.

Safe-Haven Currencies: JPY and CHF

During times of global economic uncertainty or market turbulence, capital tends to flow into these two currencies. Japan and Switzerland’s political stability and independent economic structures make them “risk-off” assets. These currencies generally exhibit lower volatility and stronger appreciation potential.

For risk-averse investors, allocating part of their portfolio to safe-haven currencies can serve as a stabilizer. Additionally, the yen’s carry trade mechanism offers extra interest income opportunities.

Commodity Currencies: AUD and CAD

These currencies’ values are closely linked to international commodity prices. Australia, as the world’s largest iron ore exporter, has an AUD highly correlated with iron ore prices. Canada’s currency is tied to energy commodities like oil.

The advantage of commodity currencies is their relatively straightforward trend analysis—tracking commodity prices can help predict currency movements. The price cycles of iron ore from 2021 to 2024 exemplify this. They are especially suitable for beginners, as their logic is simple and easy to grasp.

Emerging Market Currencies: RMB and ZAR

These currencies often offer higher interest rate spreads but come with greater volatility risks. Changes in political and economic stability, foreign exchange liquidity restrictions, can cause large swings. Unless you have strong risk assessment skills, it’s advisable for beginners to approach cautiously.

Key Currency Pairs: Current Hotspots for Allocation

The best answer to “which currencies to buy now” largely depends on your understanding of current market trends. Let’s look at the latest features of some major currency pairs:

EUR/USD: Beneficiary of a Weak Dollar Era

Since 2025, the Fed’s policy stance has shifted from aggressive adjustments to a wait-and-see approach, while the ECB has shown relative firmness. This has increased the euro’s attractiveness against the dollar. With the US dollar index under pressure and US economic growth slowing, EUR has continued to strengthen.

This means that by allocating to euros, investors can enjoy Europe’s relatively stable interest rate environment and benefit from dollar depreciation-driven exchange gains.

USD/JPY: Reflection of Policy Divergence

The Bank of Japan has paused rate hikes considering US tariff risks, while the Fed is in a policy adjustment phase. This divergence narrows the US-Japan interest rate gap, leading to a tug-of-war in USD/JPY. For investors, the yen’s safe-haven appeal becomes prominent during market instability, though returns may be limited.

CHF: Indicator of Risk Aversion

As the US faces trade tensions and fiscal challenges, the Swiss franc is sought after for its safety. CHF has shown stable appreciation trends, offering relatively certain returns for those holding Swiss francs. However, note that Swiss interest rates are very low, so gains mainly come from exchange rate movements rather than interest income.

AUD: Participant in Commodity Cycles

AUD’s trend is closely tied to iron ore, copper, and other major commodities. With global economic recovery expectations, demand for these commodities tends to strengthen, boosting AUD. Additionally, Australia’s relatively high interest rates provide steady carry income.

Comparing Fixed Deposits, Funds, and Margin Trading: Find Your Fit

After understanding different currencies, the next step is choosing an investment method. There are three main approaches, each with pros and cons:

Foreign Currency Fixed Deposit: Stable but Less Flexible

This traditional method involves opening a foreign currency account with a bank, depositing funds, and earning fixed interest. Advantages include minimal risk and stable returns. Disadvantages are poor liquidity—early withdrawal may incur penalties or interest deductions. In the current low-interest environment, relying solely on fixed deposit interest yields limited gains.

Foreign Currency Funds: A Balanced Solution

Funds offer a middle ground between fixed deposits and margin trading. You can invest in TWD, and the fund company handles currency exchange and management. They are flexible, tradable anytime, with interest levels between savings and fixed deposits. Suitable for investors seeking both interest and exchange gains without high risk.

Common foreign currency funds include money market funds (e.g., UBS USD Fund) and currency ETFs (e.g., Yuanta USD Index ETF). The latter is especially suitable for tracking USD index movements.

Forex Margin Trading: High Leverage, Double-Edged Sword

This method offers the highest potential returns but also the greatest risks. Leverage amplifies your control over larger positions with less capital. Forex margin trading focuses solely on exchange rate differences, not interest income. Its 24-hour operation, T+0 mechanism, and low entry barriers make it attractive to experienced traders.

However, leverage is a double-edged sword. Regulatory bodies like ASIC recommend keeping leverage below 30x for major currency pairs. Blindly pursuing high leverage can lead to margin calls and losses.

What Foreign Currency Portfolio Should You Build Now?

Considering the current exchange rate environment, central bank policies, and personal risk tolerance, here are phased allocation suggestions:

Conservative Investors

• 50% AUD fixed deposit: balancing interest spread and stability
• 30% JPY fixed deposit: reducing overall risk and providing hedging
• 20% USD fixed deposit or fund: maintaining dollar exposure and global liquidity

Balanced Investors

• 40% AUD funds: capturing commodity currency trends and interest spreads
• 30% EUR funds: participating in euro appreciation and policy benefits
• 20% JPY or CHF: risk hedging
• 10% for short-term trading: gaining forex trading experience

Aggressive Investors

• Mainly through margin trading in AUD, EUR, and other major pairs
• Leverage controlled within 15-25x
• Combining safe-haven currencies to manage overall risk

Factors Behind Exchange Rate Fluctuations

To make informed decisions, understanding what drives exchange rates is essential:

Inflation and Interest Rates

A country’s inflation level determines its central bank’s policy space. Lower inflation currencies tend to appreciate as their purchasing power remains strong. Interest rates directly influence capital flows—higher rates attract foreign investment, pushing up the currency.

Political Stability and Economic Performance

Political and economic stability are reflected in currency strength. Stable governments and strong economies tend to see currency appreciation; instability leads to depreciation. The Ukrainian hryvnia’s sharp fall during the Russia-Ukraine conflict is a typical example.

Trade Conditions and Foreign Reserves

A country with strong export prices often sees its currency appreciate. Central bank foreign reserves and intervention willingness also influence exchange rate trends.

Five Essential Tips for Beginners’ Practical Trading

1. Avoid currencies you don’t understand.

While many currencies exist, the most manageable and liquid are major pairs like USD, EUR, JPY. Beginners should focus on these rather than chasing obscure currencies.

2. Stay updated on local and international news.

Exchange rates fluctuate daily; central bank policies, economic data, geopolitical risks can trigger volatility. Follow CNBC, Bloomberg, Yahoo Finance, Investing.com, and other financial media to stay informed.

3. Diversify across currencies and tools.

Don’t put all your funds into one currency or method. Combine USD fixed deposits, AUD funds, and some JPY for hedging. Diversification reduces risks from single currency swings.

4. Use stop-loss and take-profit orders.

Especially in short-term trading, setting stop-losses is crucial to avoid large losses. Before trading, plan your exit points—e.g., if the rate drops x%, exit; if it rises y%, take profit.

5. Time your entries carefully; avoid chasing highs or selling lows.

Most losses occur when buying at peaks or selling at bottoms. Develop a trading plan, wait for confirmed trends, and only enter when the trend is established (often after a 5-minute or longer confirmation). Patience is key.

Deepening Understanding: Profiting from Interest and Exchange Differentials

Returns in foreign currency investments come from two sources: interest rate spreads and exchange rate movements.

Interest rate spread refers to the difference between deposit rates in different countries. For example, if the US offers 5% and Taiwan 2%, the 3% difference is potential profit. But high spreads often come with higher exchange rate risks—gains in interest may be offset by unfavorable currency movements.

Exchange rate difference is the change in currency prices during conversion. Buying USD at 33 TWD and selling at 35 TWD yields profit. Conversely, if the currency moves against you, losses occur.

The key is balancing both. Investors should decide whether to pursue stable interest income or short-term gains from exchange rate fluctuations based on their risk appetite and time horizon.

Final Thoughts: Make Scientific Decisions and Keep Learning

The question of “which currencies to buy now” is dynamic; it changes with central bank policies, commodity prices, geopolitical developments. Building your own analytical framework, continuously learning, and adjusting your portfolio accordingly are essential.

Practical experience is irreplaceable—use demo accounts to test strategies, evaluate your judgment and risk management skills in real markets. Once you gain sufficient experience and strategies are validated, then consider real trading.

The road of foreign currency investment is long. Maintaining humility and constantly optimizing your approach are the keys to success.