Foreign exchange investment, start properly in 2025

Why Should You Pay Attention to Foreign Exchange Now?

The global financial market in 2025 is a hot topic. The Federal Reserve’s rate cut stance and the divergent monetary policies of Europe and Japan are causing turbulence in the foreign exchange market. Foreign exchange investment is no longer just about short-term gains from currency fluctuations. It has evolved into a strategy for inflation hedging, asset diversification, and aligning with the global interest rate cycle.

The current exchange rate trend is clear. The US dollar maintains a defensive strength as the reserve currency, the euro is trading within a range, and resource currencies are reacting sensitively to commodity prices. In this environment, foreign exchange investment has become a necessity rather than an option.

What’s the Difference Between FX and Foreign Exchange Investment?

Many beginners get confused. FX(Foreign Exchange Trading) focuses on real-time short-term trading. It uses leverage to aim for profits within a single day. In contrast, foreign exchange investment is a long-term asset diversification strategy. It involves building a portfolio using various instruments such as savings accounts, ETFs, and long-term positions.

FX is a speed game, while foreign exchange investment is a directional game. For beginners, starting with the slower pace of foreign exchange investment is a wise choice.

Three Strategies Based on Profit Structures

1. Conservative: Earning Interest with Foreign Currency Deposits

The simplest and most stable method. Hold dollars, euros, or yen directly and earn deposit interest.

Currently, the annual interest rates for dollar deposits are around 2.7% to 3.3%, euros about 0.4%, and yen nearly 0%. Considering mobile currency exchange benefits(up to 90%), exchange costs can be significantly reduced.

If you plan to spend abroad or prefer conservative investments, this method is suitable. Especially, holding multi-currency deposits with dollar, euro, and yen can mitigate shocks from sharp currency fluctuations.

2. Middle Ground: Betting on the Entire Market with ETFs and ETNs

Products that reflect not only exchange rates but also interest rates and bond prices. Examples include dollar index ETFs(DXY), euro bond ETFs, and global currency ETFs.

In 2025, the global ETF market reached $17 trillion, with a sharp increase in inflows into dollar and euro ETFs. Since the beginning of the year, dollar index ETFs have gained about 3%, and euro index ETFs about 8%. This indicates that the foreign exchange market is shifting from a simple speculation market to a core component of macroeconomic portfolios.

The main advantages of ETFs are diversification and liquidity. You are automatically exposed to a basket of major global currencies without betting on individual currencies. The downside is that management fees and currency hedging costs can reduce actual returns.

3. Aggressive: Using Leverage with CFDs and Futures

Trading large positions with small margin deposits. For example, if USD/JPY rises from 153 yen to 155 yen, a $100,000 position can yield about 1.3% profit. Conversely, if it moves against you, the same percentage loss occurs.

Global CFD trading volume is increasing annually, especially among retail investors in Europe and Australia. However, the US restricts retail FX trading, and legitimate trading is only possible through licensed brokers such as ASIC (Australia), FCA (UK), and MAS (Singapore).

Understanding the Characteristics of Different Currencies

Safe Asset Currencies: USD, CHF, JPY

They tend to appreciate during economic uncertainty or geopolitical crises. Since Trump’s administration took office in November, volatility has decreased, and dollar fluctuations have diminished. The dollar index(DXY) stabilizes around 100, and USD/JPY remains in the early 150s.

The Bank of Japan(BOJ) has indicated the possibility of normalizing interest rates in the first half of next year, which could lead to a gradual yen rebound.

Resource Currencies: AUD, CAD, NZD

Directly linked to oil, copper, iron ore, and other commodity prices. In early November, Brent crude was at $64 per barrel, and copper rose 4% from the previous month, reflecting a recovery in commodity markets. As a result, the Australian dollar rebounded to around 0.65 USD, and the Canadian dollar strengthened to about 1.40 CAD/USD.

China’s economic stimulus measures and increased commodity imports are supporting this trend.

High-Yield Currencies: Emerging Market Currencies

Brazilian real(BRL), Mexican peso(MXN), and Indian rupee(INR) benefit from high interest rates and growth rates. The interest rate differentials and slowing inflation in emerging markets make them attractive.

The Mexican peso has risen about 5% since the beginning of the year, and the Indian rupee remains stable with ongoing capital inflows. Southeast Asian currencies(Malaysia, Indonesia) are also strengthening as foreign funds flow in.

Which Currencies Should You Buy Now?

The market remains defensive, centered on the dollar. The Fed’s cautious pace of rate cuts and geopolitical risks are increasing safe-haven demand.

Dollar: As the reserve currency, capital flows back during crises. It is the top priority choice at this moment.

Euro: Limited upside due to sluggish European manufacturing and fiscal burdens. The ECB is cautious about further easing, and the euro is trading within a range.

Australian Dollar: Rising inflation has become a variable. The Reserve Bank of Australia(RBA) has stated there will be no rate cuts this year, and the market is waiting until 2026. AUD/USD is fluctuating around 0.66.

Conclusion: Focus on a dollar-centered portfolio, using euro and yen as supplementary diversification tools. Consider resource currencies only for short-term trading, with long-term holdings primarily in dollars for stability.

Key Factors Moving the Exchange Rate

Interest Rate Differentials Decide Everything

In November, US consumer expected inflation remains high at 4.7%. The Fed cut the benchmark rate to 4.00% but remains cautious about further easing. Meanwhile, the RBA has clearly stated no rate cuts this year, and the ECB has kept rates steady due to limited inflation slowdown.

This interest rate gap is the fundamental reason behind the current exchange rate trends(dollar strength, euro stability, and weakness in Australian dollar and yen).

( Fiscal Soundness Determines Long-Term Confidence

The US fiscal deficit remains around 6% of GDP, with ongoing concerns about a federal government shutdown. Conversely, Europe is strengthening fiscal discipline and reducing debt ratios. In the short term, this favors dollar assets, while in the medium term, it encourages diversification into euros.

) Trade and Geopolitics Are Variables

Despite ongoing instability in the Middle East and uncertainties in US-China trade relations, China’s export recovery and supply chain reorganization centered on India and Vietnam support Asian currencies.

Practical Guide for Beginners

First, Set Clear Goals

Abandon short-term profit targets; instead, set specific, sustainable goals like “maintain 20% foreign currency exposure for 3 years.” Foreign exchange investment is a marathon, not a sprint.

Second, Clarify Your Investment Instruments

Use savings accounts for short-term liquidity, ETFs for medium-term diversification, and CFDs for short-term trading—each method efficiently serving different purposes.

Third, Calculate Hidden Costs

Fees, spreads, rollover interest—these costs significantly impact long-term returns. Be aware of them.

Fourth, Start Small and Follow Principles

Begin with less than $1,000 to learn market dynamics. Set loss limits and trade based on principles rather than emotions—key to survival.

Fifth, Keep Records and Prepare for Taxes

Document trading history and exchange rates clearly, and check tax obligations on currency gains in advance.

Things to Remember When Investing in FX

Avoid products you don’t understand. CFDs and overseas futures involve high leverage and complex structures. Only approach after thorough understanding.

Use only licensed institutions. Trading through authorized brokers such as ASIC (Australia), FCA (UK), and MAS (Singapore) ensures fund safety.

Diversify your investments. Spreading across 3-4 currencies like dollar, euro, yen, and resource currencies reduces risk.

Predefine stop-loss and take-profit levels. Setting target profits and loss limits before trading prevents emotional decisions.

Comply with regulations and tax laws. Using unlicensed overseas sites may violate anti-money laundering###AML### laws.

Be cautious of spreads and currency exchange fees. These costs directly affect long-term profitability.

Use official platforms with smooth deposit/withdrawal processes. Always manage funds through your own accounts.

Conclusion: The Direction of Foreign Exchange Investment in 2025

Foreign exchange investment is no longer just about short-term gains. It has become a core asset strategy responding to global interest rate cycles and inflation trends. The US rate cut phase, defensive dollar strength, delayed easing in Europe and Australia, and the recovery of emerging markets are making currency differences more pronounced.

At this point, the key is not prediction but diversification. Maintain a dollar-centered defensive portfolio, balanced with euro, yen, and resource currencies. From a long-term perspective, balancing exchange rates and interest rates is a wise approach.

Most importantly, risk management, consistent record-keeping, and compliance with regulations are the pillars of stable foreign exchange investment.