Recently, I’ve noticed many friends around me starting to ask about foreign currency investments. It seems everyone has realized that just keeping Taiwan dollars in a fixed deposit really doesn’t earn much money. To be honest, investing in foreign currencies isn’t as complicated for beginners as it might seem, but it’s not something you can completely treat as a guaranteed profit business. I’ll share my thoughts on this topic from my own perspective.

First, let’s talk about why you should invest in foreign currencies. Taiwan’s fixed deposit interest rates have been consistently low, averaging around 1.7% annually, while currencies like the US dollar and Australian dollar have much higher interest rates. This interest rate difference is an opportunity. But more importantly, it’s about risk diversification—if all your assets are only denominated in Taiwan dollars, a significant depreciation of the NT dollar would greatly shrink your wealth. From an asset allocation perspective, everyone should hold some foreign currencies. Additionally, foreign exchange trading participants come from all over the world, making it hard to manipulate, and it’s more transparent compared to stock markets. Plus, the forex market trades 24 hours a day, unlike stocks with fixed trading hours, so if prices move against you, you can immediately stop-loss and exit.

There are generally three ways for beginners to invest in foreign currencies. The first is foreign currency fixed deposits, which are the simplest and most secure, just to earn some interest. You can open a foreign currency account at a bank; if you’re over 20 and bring your ID, you can do it. The downside is low liquidity—if the exchange rate has already reached your target but the deposit term isn’t up yet, early withdrawal will incur interest penalties.

The second is foreign currency funds, which are more suitable for those needing flexible operations. No lock-in period, you can buy and sell anytime. The interest usually falls between savings accounts and fixed deposits. Common options include money market funds and currency ETFs, which can be directly invested with Taiwan dollars, with the fund company handling currency exchange.

The third is forex margin trading, which I pay more attention to. This isn’t about earning interest, but purely about profit from exchange rate differences. Because forex volatility is relatively low, traders often use leverage of 50 to 200 times. The trading method is similar to stocks, requiring analysis of currency price trends and choosing the right timing to enter. But leverage carries huge risks—beginners should never use excessive leverage. It’s generally recommended that leverage for major currency pairs be below 30 times.

When talking about how much you can earn from buying and selling foreign currencies, it’s really about “spread” and “interest rate differential.” The spread is the difference in price between buying and selling at different times, while the interest rate differential is the difference in benchmark interest rates between countries. For example, Taiwan’s fixed deposit rate is 2%, and the US is 5%, so a 3% gap represents potential profit. But that 3% is definitely not guaranteed profit. Many make the mistake of earning the interest rate differential but losing on the exchange rate—if you exchange 33 TWD for 1 USD, and in the end, the USD depreciates to only 30 TWD, even if you earned 5% interest, overall you still lose money. So before trading, you must be clear whether you’re relying on high interest income during holding or trying to profit from short-term exchange rate fluctuations.

As for which currencies beginners should choose, Taiwan banks generally offer 12 currencies, including USD, AUD, CAD, HKD, GBP, CHF, JPY, EUR, NZD, SGD, ZAR, SEK, etc. These currencies can be divided into four main categories.

The first is policy-driven currencies, mainly USD and EUR, whose exchange rates are mainly influenced by central bank policies. When central banks loosen monetary policy, exchange rates tend to fall; when they tighten, they rise. Investing in these currencies requires closely monitoring central bank actions.

The second is safe-haven currencies, mainly JPY and CHF. These countries have developed economies and political stability. During market turbulence, people tend to buy these currencies for safety. Many also borrow these low-interest currencies to invest in high-interest assets, then convert back to their own currencies when the economy improves, earning both the interest rate differential and exchange rate gains.

The third is commodity currencies, like AUD and CAD. These countries mainly export bulk commodities. When commodity prices rise, their currencies tend to appreciate; when prices fall, they depreciate. For example, Australia is the world’s largest iron ore exporter, so when iron ore prices drop, the AUD also depreciates. These currencies are relatively easier for beginners to enter because their price movements are easier to grasp.

The fourth category is emerging market currencies, like RMB and ZAR. These countries are still in rapid development, with high interest rates that are attractive. But the risks include political instability, large exchange rate fluctuations, low liquidity, and wide bid-ask spreads. ZAR has the highest interest rate but also the greatest risk—beginners should be very cautious.

Overall, besides the most basic choice of USD, I think safe-haven currencies and commodity currencies are more suitable for beginners. Safe-haven currencies perform steadily, and commodity currencies’ trends are easier to understand. Combining these two makes a good fit for most investors.

Recent market conditions are also worth noting. The Federal Reserve is expected to start cutting interest rates from the second half of 2024 and keep rates steady into 2025. This rate cut will have ripple effects on major global currencies. The US dollar index is composed of six currencies, with the euro accounting for the largest share at 57.6%, followed by JPY at 13.6%, GBP at 11.9%, and CAD at 9.1%.

The EUR/USD is the most traded currency pair, involving the two largest economies in the world. As the Fed cuts rates while the European Central Bank maintains rates, and with market concerns over US policy uncertainty, the euro has risen to a four-year high against the dollar.

The USD/JPY carry trade is very common, but the Bank of Japan has paused rate hikes after assessing the impact of US tariffs. Most economists expect the BOJ to raise rates again by the end of the year, which would strengthen market expectations of narrowing the US-Japan interest rate gap. In the short term, both bulls and bears are still battling, and the JPY may continue to fluctuate.

The GBP/USD pair has a long history. Its strength this year is mainly due to dollar weakness rather than fundamental improvements in the UK economy. As Fed policies become clearer, the market may reprice the pound’s bullish outlook. The UK’s economic growth is sluggish, and rate cut expectations remain, so the pound is likely to stay in a range.

Although the Swiss franc is from a small country, it’s highly regarded as a safe-haven investment. Since 2026, the US has been mired in trade and fiscal issues, challenging the dollar’s safe-haven status, making the Swiss franc’s safe-haven appeal even more prominent, attracting large capital inflows. In the medium to long term, slowing US economic momentum, Fed rate cuts, and a generally weaker dollar are favorable for the Swiss franc.

Many factors influence exchange rate fluctuations. Countries with low inflation tend to see their currencies appreciate because prices of goods and services rise slowly. Rising interest rates also lead to currency appreciation, as high rates attract foreign capital. Countries with high government debt are less attractive to foreign investors, causing their currencies to depreciate. Improving trade conditions and rising export prices can push up exchange rates. Politically stable and economically strong countries are more attractive to foreign capital, which also supports currency appreciation.

For currency investment beginners, the most important thing in practice is choosing the right targets. You need to understand the policies, interest rates, and major export changes of the currencies you plan to go long or short on, then decide your trading direction. For example, if you believe the US will cut rates this year and Japan’s rates will stay unchanged, you might go long on USD/JPY. This judgment will guide your entire investment decision.

Formulating a reasonable trading strategy is key to success. Based on your risk tolerance, trading experience, and market conditions, develop a strategy that suits you. The strategy should include entry and exit points, stop-loss and take-profit levels, and consider market risks and transaction costs.

Mindset is also crucial. Don’t let market volatility sway your emotions and decision-making. Keep learning and practicing; accumulating experience is the only way to succeed.

A few investment tips: First, don’t trade currencies you don’t understand. Beginners should only invest in familiar currencies, mainly USD and JPY. Second, always monitor exchange rate fluctuations. Forex rates are affected by market, economic, and news factors, so it’s recommended to follow international news websites. Third, diversify your holdings. You can hold both USD fixed deposits and AUD funds to hedge risks. Fourth, learn to use stop-loss and take-profit orders. The most critical part of forex trading is setting proper stop-loss levels to prevent large losses. It’s recommended to limit yourself to two trades per day. Fifth, pay attention to entry timing. Don’t chase highs or sell in panic; plan your trades in advance and wait for the right moment. Usually, establishing a trend takes at least 5 minutes or longer; once a trend forms, you can consider participating.

Finally, I want to say that any trading strategy is just theory without practice. The best way to practice is through demo accounts, which allow you to test strategies and risk management in real market conditions without risking real money. For forex beginners, patience is key—gradually accumulating experience will help you find your own rhythm in this market.