One of the most important elements in forex trading is understanding currency pairs. There are different types of currency pairs. Among them are major, minor, and exotic currency pairs.
Unlike major pairs, exotic currency pairs don’t have the same amount of liquidity in the market. Still, some exotic pairs are worth trading due to their distinctive price action and strategies.
Exotic currencies are often called “alternative” or “third world” currencies since they potentially offer higher returns than other currencies. On one hand, the exciting opportunities that come with trading exotic currency pairs are also associated with some risks.
For this blog post, we will provide the top exotic currency list available for trading in the foreign exchange market and dissect some aspects that make these currencies attractive for traders.
Key Notes on Exotic Currency
- Exotic currencies are thinly-traded currencies in forex markets; traders rarely use them in global financial transactions.
- Exotic currency pairs can be extremely volatile and traded at low volumes. They lack market depth and are illiquid. These factors make their spread staggeringly high.
- Exotic currency is linked to developing or emerging market countries. They become nonconvertible since they are often subject to partial or total exchange rate controls.
What is an Exotic Currency?
Exotic currency is a forex term referring to a thinly-traded currency.
Trading exotic currency pairs can be expensive—their illiquid nature makes the bid-ask spread large to compensate for.
Exotic currencies differ from major ones since traders cannot easily trade them in the foreign exchange market. They are often subject to partial or total exchange rate controls, rendering them nonconvertible.
The Mexican peso, Thai baht, and Saudi Arabian riyal are examples of exotic currencies. Unlike the U.S. dollar, euro, or Swiss franc, which come from developed countries with large trading relationships, exotic currencies are associated with developing or emerging market countries.
Exotic currencies have higher volatility because of the fragile nature of the corresponding country’s economy. While the state of major currencies lies in the health of its economy and the interest rate differential, exotic currencies often move based on political landscape changes.
Because of these circumstances, investors trading exotic currency pairs often require higher margins in their respective brokerage accounts. Doing so provides a safety cushion in any case of extreme market crash.
Best Exotic Currency Pairs to Trade
Exotic forex pairs usually involve one major currency and a currency from a developing economy. However, some pairs include two exotic currencies, such as NOK/TRY or TRY/RUB, which are also popular among traders.
Related: Top 10 Highest Currency in the World 2025
Despite having extreme volatility, exotic pairs offer an opportunity to diversify forex trading. A trader can find trading opportunities with exotic currencies when there are none for major forex pairs.
Also, developing market currencies have higher interest rates, making them appealing for carry trades.
For the best odds of enjoying a profitable trade attaining, below are the top five examples of exotic currency pairs to trade:
USD/MXN
The United States of America and Mexico are two of the world’s top oil producers. As neighbouring countries, they form close trade relations.
As of 2022, Mexico has sent almost 80% of its exports to the United States. As a result, oil prices often affect the USD/MXN currency pair.
USD/SEK
For this currency pair, investors mainly focus on the central banks of Sweden and the U.S.
Since both countries are experiencing inflation, Riksbank and the Federal Reserve have raised interest rates to solve price pressures.
Policymakers in the United States and Sweden suggest committing to rate hikes to bring inflation to their target levels.
If you are to trade USD/SEK, it is best to focus on monetary policy.
EUR/NOK
Since Norway is a member of the European Economic Area but not the European Union, the krone currency has an intriguing relationship with the euro.
Norway’s central bank, Norges Bank, increased rates in May 2023, which caused the krone currency to weaken before regaining status.
USD/CNH
Two China-related currency pairs exist as of today. One is the onshore yuan, which exporters mainly use, and the other is the offshore yuan (CNH), which investors in international markets use to speculate on the currency.
Although the economies of China and the United States are some of the largest in the world, the USD/CNH is considered an exotic pair. It can be an interesting currency pair to trade on the exotic front.
A trader can use several data and news to add to their strategies in trading USD/CNH, despite the exotic currency having a much lower trade volume.
JPY/ZAR
Traditionally, the Japanese yen is a stable forex currency, even referred to as a “safe haven” currency.
On one hand, the rand is more volatile, and its movements are often sensitive to the commodities market. This makes ZAR the crowd favorite among all exotic currencies.
In 2022, The Bank for International Settlements noted that JPY/ZAR’s average daily turnover was five billion pounds. To put into perspective, this represents only 0.1 percent of all global trade.
Is Investing in Exotic Currency Pairs Worth It?
Currency pairs from emerging markets have things in common. They are sensitive to changes in U.S. interest rates and market expectations.
Since they have a higher risk in forex trading, traders and investors generally opt for major currencies and avoid emerging market currencies in a risk-off environment.
Remember that when trading exotic pairs, they have high volatility yet lower liquidity than major pairs.
A 2016 Bank for International Settlements study also states that the USD/EUR OTC foreign exchange turnover comprised 23.1% of forex transactions daily. Compared to this rate, a popular exotic currency pair (USD/RUB) only had a daily trading volume of 1.1%.
While it seems daunting and risky, there are advantages to trading exotic currency pairs. For instance, their high volatility allows the trader to earn significant profits if the price fluctuations favor them.
Diversification is another huge advantage of trading exotic currencies. Including these pairs in your portfolio may serve as a risk management strategy since it helps you guard against positions that you may have taken.
Should You Trade Exotic Currencies?
If you are a novice in forex trading, starting your trade with exotic currencies is not a good path. They have higher spreads and are less liquid compared to majors and minors.
Learn more about spread here: TradersUnited – What is the Spread in Forex?
For a more experienced trader, exotic pairs may be a viable option if you have a good trading strategy for them. Although exotic currency pairs are riskier, the risks potentially pay off in a skilled trader’s hands.
To best kickstart your journey as a forex trader, it is more favorable to trade major or minor currency pairs. These pairs have more trade activity and lower spreads.
Read more: What are the Best Currency Pairs to Trade for Beginners?
Discover a Better Way to Trade
Are you interested in trading exotics but do not know the best exotic currency pairs to trade? Join the discussion and interact with millions of traders worldwide. CommuniTrade is the best way to learn the forex trading market trends and understand market analysis from a professional’s viewpoint.
FAQs
Which currencies are best to trade exotic currencies against?
The best option to trade exotic currencies is against a safe-haven currency, like the Yen or the US dollar. Since there is not enough liquidity in exotic pairs, it will be challenging to find traders who will take them as the opposite side of the trade.
Where can you trade currency pairs?
You can trade currency pairs through any forex broker. Some brokers offer larger varieties compared to others.
Learn more about these differences here: TradersUnited – Caution: Margin and Stop-Out Levels Vary
What affects exotic currency pairs’ prices?
Several factors can affect the performance of exotic currency pairs. Some of the key indicators include economic data, monetary policy, political developments, and extreme weather events.
Read more about these factors here: TradersUnited – Buying and Selling Currency Pairs in Forex
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