2025 Global Currency Market Changes and Foreign Currency Asset Allocation Strategies

How to Read the Current Foreign Exchange Market Situation

In November 2025, the global financial markets are moving amidst conflicting signals of the Fed’s interest rate decision path uncertainty and inflation slowdown. Although key economic data releases are delayed due to the U.S. federal government shutdown, countries are gradually shifting toward easing their monetary policies. Notably, portfolio strategies based on interest rate differentials and asset diversification, rather than just currency arbitrage, have become central to foreign currency management.

The US Dollar Index(DXY) remains stable around the 100 level, and currency volatility has been easing post-election. The euro has risen to around 1.156 dollars, and the Australian dollar has rebounded to about 0.65 dollars, supported by a recovery in raw material import demand. This indicates the formation of profit structures by currency, aligning with the global macroeconomic cycle beyond simple currency arbitrage.

Three Approaches to Foreign Currency Investment: Which One Suits You?

Conservative Management: Foreign Currency Fixed Deposits and Multi-Currency Accounts

The simplest and most stable method is direct foreign currency holdings through banking channels. Maintaining deposits in dollars, euros, yen, etc., allows focus on interest income rather than currency arbitrage. As of November, U.S. dollar deposit interest rates are around 2.7%–3.3% annually, euro deposits about 0.4%, and yen nearly 0%.

The advantage of multi-currency deposits is holding multiple currencies simultaneously, providing a buffer against sharp declines in a specific currency. Diversifying into dollars, euros, and Australian dollars at certain ratios based on Korean won can reduce portfolio losses caused by won depreciation or currency fluctuations. Considering up to 90% preferential exchange rates, this becomes a practical option for novice investors or individuals with frequent overseas expenses.

Moderate Management: Global Currency ETFs and Bond ETNs

Using ETFs or ETNs allows exposure to a basket of major global currencies without direct investment in individual currencies. Dollar Index ETF(DXY), euro bond ETFs, and emerging market currency ETFs reflect not only exchange rates but also interest rate and bond price changes.

The global ETF market reached approximately $17 trillion in 2025, an all-time high, with inflows mainly into dollar and euro ETFs. Year-to-date, dollar index ETFs gained about 3%, and euro index ETFs about 8%, demonstrating that foreign exchange markets are now integral to macroeconomic portfolio strategies beyond short-term trading.

The main strength of ETFs is liquidity and low entry barriers. However, management fees and hedging costs significantly impact net returns, so long-term holding strategies should carefully consider these costs.

Aggressive Management: FX Margin Trading and CFD Trading

Trading with high leverage on small deposits to profit from currency pair fluctuations. For example, if USD/JPY rises from 153 to 155 yen, a $100,000 position could yield about 1.3% profit, but the same movement could also result in a similar loss.

Global CFD trading volume is increasing annually, especially among retail investors in Europe and Australia. However, individual FX trading is restricted in the U.S., and only trading through officially licensed brokers such as ASIC(Australia), FCA(UK), MAS(Singapore) is legal. Therefore, when trading CFDs, it is essential to verify leverage limits, margin regulations, and broker licensing.

Practical Comparison of the Three Foreign Currency Management Methods

Which Currencies to Watch in November 2025?

Safe Asset Currencies: USD, JPY, Swiss Franc

The US dollar continues to reaffirm its status as a reserve currency, strengthening during global economic uncertainty and geopolitical risks. The dollar index remains stable near 100, with volatility significantly reduced since the Trump administration took office.

The Japanese yen has room for gradual appreciation, as the Bank of Japan(BOJ) considers normalizing interest rates. USD/JPY is trading around the low 150s, and it is viewed as a more stable asset compared to the Australian dollar relative to the Korean won.

Resource-Linked Currencies: AUD, CAD, NZD

These currencies are closely tied to commodity prices such as oil, natural gas, copper, and iron ore. Brent crude was at $64 per barrel in early November, up 4% from the previous month, reflecting a recovery in commodity demand.

Accordingly, the Australian dollar rebounded to about 0.65 USD, and the Canadian dollar strengthened to around 1.40 CAD/USD. China’s economic stimulus policies and increased commodity imports support this trend. Asset allocation into AUD can be particularly useful for portfolio diversification in scenarios of rising commodity prices.

High-Yield Currencies: Emerging Market Currencies

Currencies like the Brazilian real(BRL), Mexican peso(MXN), and Indian rupee(INR) are becoming central to carry trades due to relatively high interest rates and growth rates. As inflation in emerging markets slows and they have more room for rate cuts compared to developed countries, these assets become more attractive.

The Mexican peso has appreciated by about 5% since the beginning of the year, and the Indian rupee remains relatively stable with ongoing foreign capital inflows. Southeast Asian currencies such as the Malaysian ringgit and Indonesian rupiah also see net foreign inflows, strengthening both local bonds and currencies.

Key Factors Moving Exchange Rates in the Forex Market

( 1. Differences in Central Bank Interest Rate Policies

As of late October, the Fed lowered the federal funds rate to 4.00%, but Powell emphasized that “additional rate hikes will be cautious until inflation reliably converges to the target.” Meanwhile, the Reserve Bank of Australia)RBA### indicated no plans for rate cuts this year, citing slower-than-expected service inflation. The European Central Bank(ECB) also kept rates unchanged, citing limited inflation slowdown.

These policy divergences are the main drivers behind the current dollar strength, euro stability, and Australian dollar weakness.

( 2. Fiscal Health and Currency Confidence

The U.S. fiscal deficit remains around 6% of GDP, with concerns over a government shutdown fueling market anxiety. Conversely, major European countries are strengthening fiscal discipline and gradually reducing debt ratios. These fiscal disparities are creating investment flows favoring dollar assets and, in the medium term, diversifying into euro assets.

) 3. Trade Flows and Geopolitical Variables

Despite ongoing instability in the Middle East and uncertainties in U.S.-China trade relations, China’s export recovery and supply chain reorganization centered on India and Vietnam are driving Asian currencies higher. The slowdown in commodity price increases is also limiting short-term rebounds of currencies like AUD and CAD.

Practical Strategies for Foreign Currency Beginners

Clear Investment Goals

Setting specific, sustainable goals such as “maintain 20% foreign currency ratio for 3 years” is more important than aiming for “20% profit by year-end.” Focus on long-term asset diversification rather than short-term gains.

Choose Products According to Your Risk Profile

If short-term liquidity is needed, opt for foreign currency deposits; for medium-term diversification, ETFs; for short-term volatility, CFDs. Understand each product’s characteristics and select accordingly.

Thoroughly Review Hidden Costs

Fees, spreads, currency exchange charges, rollover interest, etc., directly impact long-term returns. Accumulated costs over time can significantly erode actual gains, especially with long-term holdings.

Start with Small Investments

Begin with amounts under $1,000 to familiarize yourself with market movements, then gradually increase. Predefine loss limits and trade according to a disciplined plan rather than emotions.

Keep Records and Manage Taxes

Accurately record exchange rates and transaction details, and verify tax obligations on currency gains beforehand.

Essential Checks Before Investing in Foreign Currency

Avoid Trading Products You Don’t Understand: CFDs and overseas futures are complex and highly leveraged; only approach after thorough learning.

Use Official Licensed Brokers: Trading through licensed brokers such as ASIC, FCA, MAS ensures fund safety.

Diversify Currencies: Spreading investments across 3–4 currencies like USD, EUR, JPY, AUD can mitigate losses from sharp currency fluctuations.

Set Pre-Trade Stop-Loss and Take-Profit Levels: Defining profit and loss limits before trading helps prevent impulsive decisions.

Comply with Regulations: Using unlicensed overseas platforms may violate anti-money laundering laws.

Monitor Operating Costs: Spreads, exchange fees, and interest costs directly affect long-term profitability.

Manage Funds Safely: Use official platforms with easy deposit/withdrawal, and keep funds in your own accounts.

Conclusion: The Direction of Foreign Currency Investment in 2025

The current foreign exchange market is not a playground for short-term speculation seeking simple arbitrage. It is a strategic asset management arena influenced by the global interest rate cycle, inflation trends, and differentiated monetary policies across countries.

As the U.S. moves toward rate cuts, the dollar maintains a defensive strength, while delays in easing in Europe and Australia, along with emerging market recovery, highlight currency differentiation. At this stage, the key is not precise prediction but wise diversification.

Using the dollar as a portfolio base, balanced allocation into resource-linked currencies like euro, yen, and Australian dollar, and viewing exchange rates and interest rates from a long-term perspective constitute a realistic strategy. Allocating into AUD based on the Korean won can be particularly useful for diversification and hedging against commodity price increases.

Most importantly, thorough risk management, meticulous record-keeping, and strict regulatory compliance are fundamental principles for stable and sustainable foreign currency investment.