Traders and investors, especially those involved in long term hedging techniques and in Carry trade related hedging trades, look for some currency pairs which have long term stability.

World currencies are impacted from day to day, throughout the trading year, posing certain risks and presenting new opportunities to traders. Other traders and investors however, especially those involved in long term hedging techniques and in Carry trade related hedging trades, look for some currency pairs which have long term stability. In the Carry trade especially, the profit margins are on interest rate differentials, so the actual exchange rate change and overall volatility is not wanted.

Some countries do have stable currencies, which remain overall flat against popular currencies such the US dollar and the Euro, while other currencies actually slowly rise from year to year, but slow stable growth is what defines stability.

Countries such as China, Singapore and Malaysia are known for their stable economies, Singapore in particular because it not only is a credit nation, like China, but it is also becoming the world's new safe haven for capital fleeing tax and risk, just like Switzerland has been for so long.

EUR/SGD


During 2015, Singapore's national currency remained volatile, but overall flat for the year, against the Euro. The situation is different when one looks at the USDSGD currency pair, where there has been significant appreciation. But when one takes both the Euro and the US dollar against the Singaporean dollar, it is clear that great stability is found in the longer term. So that when the Euro goes one way against the Singaporean dollar, the US dollar goes in the opposite direction and vice versa.

Euro and US dollar combined, against the Singaporean dollar has been extremely stable in 2015, in ways that far exceed the stability of gold and precious metals over the same period of time. In terms of stable growth, all the aforementioned countries' economies showed stability in 2015, this even includes Norway in Europe, which is also a highly stable economy.

It makes more sense to compare a currency against the US dollar and the Euro at this time, because gold has been in a long term downward correction, and it is therefore misleading for determining how stable a currency is. Carry traders and investors on the other hand usually look for currency pairs that are not expected to be very volatile, and which can be hedged as best as possible, against unfavorable price movement. So in that regard, the Swiss Franc was actually a highly unstable currency during 2015, as the country's central bank lifted the restricting cap back in January of 2015, resulting in a massive appreciation in the Swiss Franc against the Euro and the US dollar. The Swiss Franc is a strong currency, stable from a long term perspective, but it has been volatile during 2015. So from the perspective of a long-term investor, it would have been a good stable currency, but from the perspective of a Carry trader, it would have been a risky strong currency to trade. Other than that, the Swiss Franc remains a long term, stable currency.


Generally, all currencies which base their strength on internal economic factors, and are not strongly correlated to commodity prices, are said to be stable. In that regard, the Canadian dollar for example is not always a stable currency, because it trades in the same direction as crude oil. When crude oil price finally sets a long term up-trend, the Canadian dollar, along with the Russian Ruble, will rally. But one has to take the risk and trust that crude oil will rise steadily over the coming years, which looks likely but is not 100% certain.