Recently, I've been thinking about foreign currency investments and found that many people actually don't quite understand how to get started. Taiwanese people have always liked to buy US dollars, Australian dollars, and other foreign currencies, mainly because the Taiwanese dollar interest rates are just too low. Compared to that, the interest rate spread of foreign currencies is still quite attractive.

Speaking of foreign currency investments, many think it's just simple "buy low, sell high," but it's not that straightforward. The returns from foreign currencies mainly come from two parts: one is the exchange rate difference (the profit from currency fluctuations), and the other is the interest rate differential (the difference in interest rates between countries). For example, Taiwan's fixed deposit interest rate is about 2%, while the US has 5%. That 3% interest rate spread is what you might earn by holding US dollars. But the problem is, you might earn interest but lose money on the exchange rate, which is a common pitfall.

In Taiwan, there are generally three ways to invest in foreign currencies. The simplest is foreign currency fixed deposits—opening a foreign currency account at a bank, earning interest with the lowest risk but also the lowest returns. A slightly more advanced method is buying foreign currency funds, which don't require lock-in periods and allow for anytime entry and exit, with returns between savings accounts and fixed deposits. If you already have some trading experience, you can consider forex margin trading, which uses leverage to amplify gains but also comes with much higher risks, requiring very cautious handling.

There are many types of foreign currencies. Taiwanese banks typically offer about 12, including USD, AUD, JPY, EUR, and others. These currencies can be categorized: USD and EUR are policy currencies, mainly influenced by central bank policies; JPY and CHF are safe-haven currencies, relatively stable; AUD and CAD are commodity currencies, with price trends linked to commodities; there are also emerging market currencies with high interest rates but more volatility. For beginners, I recommend starting with safe-haven or commodity currencies, which are easier to grasp.

Last year, the Federal Reserve started cutting interest rates, which caused quite a few impacts on the global currency markets. The US dollar index is composed of major currencies like the euro, yen, and pound, and their movements directly affect foreign currency investment choices. EUR/USD has always been the most traded currency pair, and recently, due to the European Central Bank's relatively independent and steady policy stance, it has attracted a lot of capital. USD/JPY has shown oscillations because of policy differences between the Bank of Japan and the Fed. The GBP is mainly influenced by a weak dollar and the UK’s sluggish economic growth. The Swiss franc, as a safe-haven currency, performs well during increased global uncertainty.

If you want to make money through foreign currency investments, you first need to understand the factors influencing exchange rates. Inflation rates, interest rates, government debt, trade conditions, political stability—all these affect currency fluctuations. The most important thing is to choose the right targets by understanding the economic policies and fundamentals behind two currencies, which will guide your trading direction.

In actual trading, foreign currency investments can be two-way. It’s not just about "buy low, sell high," but also "sell high, buy low." For example, if you expect the euro to depreciate, you can sell EUR/USD first, and when the euro really falls, buy back to profit from the difference. But this requires clear market judgment.

For beginners, a few principles are essential. First, avoid currencies you don’t understand; start with mainstream currency pairs. Second, always keep an eye on exchange rate movements and international news, as currency fluctuations are very frequent. Third, diversify your holdings—don’t put all your funds into one currency. Fourth, if you’re trading with leverage, set proper stop-loss and take-profit levels—this is key to avoiding liquidation. Fifth, don’t chase highs or sell lows impulsively; plan your trades and wait for trends to form before entering.

Overall, the barrier to entry for foreign currency investment isn’t high. You can open an account at a bank and trade 24/7, much more flexible than the stock market. But to truly profit, you need in-depth market knowledge, a solid trading strategy, and a stable mindset. The best way to learn is to practice with a demo account first, then move on to real funds once you’re familiar. Foreign currency investment is indeed a good way to diversify risk and earn returns, but only if you do your homework and avoid blindly following trends.