Can I buy with US dollars? A complete guide for beginners to quickly get started with foreign currency investment

Many people are buying US dollars and foreign currencies, but do they really know how to buy them to make a profit? Foreign currency investment may seem simple, but it involves multiple aspects such as exchange rates, interest rate differentials, and risk management. This article will help you clarify the full picture of foreign currency investment, so you can avoid detours.

Taiwan’s legal currency is the New Taiwan Dollar, and all other currencies are considered foreign currencies. For a long time, Taiwan’s fixed deposit interest rates have remained low (average annual interest rate of only 1.7%), while currencies like USD, AUD, JPY, and others have relatively higher interest rates, attracting many Taiwanese to participate in foreign currency investments. However, to truly profit from it, you need to understand exchange rate fluctuations, choose appropriate investment methods, and develop clear trading strategies.

Can I buy US dollars? First, understand the difference between foreign currencies and foreign exchange

Many people confuse the concepts of “foreign currency” and “foreign exchange,” which can affect your investment decisions.

Foreign currency refers to all foreign currencies other than the domestic currency, and is a form of foreign exchange. In the foreign exchange market, investors mainly focus on the exchange rate movements of various currencies to select the most valuable currencies for investment.

Foreign exchange refers to assets held by a country in foreign currencies, including bank deposits, government bonds, etc., used for international debt and credit settlement. Simply put, foreign exchange is the means of payment available in international balance of payments.

Foreign exchange transactions include four main categories:

1. Buying and selling foreign banknotes and coins
2. Trading foreign currency payment instruments (bills, deposit certificates, etc.)
3. Trading foreign currency securities (government bonds, corporate bonds, stocks, etc.)
4. Trading other foreign currency assets

Therefore, it can be said: Foreign exchange trading includes buying and selling foreign currencies, and currency trading is one of the forms of foreign exchange trading.

How to make money with foreign currencies? Focus on two core aspects: exchange rate differentials and interest rate differentials

Many beginners are unclear about the profit logic of foreign currency investment. In fact, currencies are like bonds without a maturity date, earning through “exchange rate and interest rate differentials.”

Exchange rate differential refers to the profit gained by investors through currency trading, from the fluctuations in exchange rates between different currencies and the timing of buying and selling. Simply put, it’s the profit from “buy low, sell high.”

Interest rate differential refers to the gains from the differences in benchmark interest rates between countries. For example, if Taiwan’s fixed deposit rate is 2%, and the US’s is 5%, the 3% interest rate difference is the potential profit.

However, this 3% profit is not guaranteed. The risk in foreign currency investment is: you might earn interest rate differential but lose from exchange rate movements.

For example, you exchange 33 TWD for 1 USD and deposit it in a US bank, earning 5% interest. But if the USD depreciates later, and when converting back to TWD you only get 30 TWD, even with good interest income, you will still suffer a loss due to the exchange rate decline. This is a typical case of “earning interest but losing from exchange rate.”

Therefore, before investing, ask yourself: Are you aiming for interest rate differential income over the holding period, or short-term profit from price differences? This decision influences your choice of investment method.

There are three main ways to invest in foreign currencies: fixed deposits, funds, and margin trading

In Taiwan, there are generally three mainstream methods for foreign currency investment:

Foreign currency fixed deposit——the most stable interest differential income

This is the simplest and lowest-risk method. You just need to open a foreign currency account at a bank, deposit USD or other foreign currencies, and periodically receive interest. Anyone over 20 with ID can do this at a bank.

Advantages: Low risk, simple operation
Disadvantages: Poor liquidity, early termination may deduct interest; if only kept as savings, the interest rate is too low

Foreign currency funds——flexible allocation options

If you don’t want to be restricted by fixed deposit terms, foreign currency funds are a good choice. They are flexible, can be bought and sold anytime, and the returns are between savings and fixed deposits. You can invest directly in TWD, and the fund company handles currency exchange on your behalf.

Common types include:

• Money Market Funds: such as UBS USD fund, management fee about 0.5%
• Currency ETFs: such as a USD index ETF, management fee about 0.6%

These funds mainly earn from interest income and exchange rate differences. Suitable for investors who want to keep their funds flexible.

Forex margin trading——high risk, high return

This is the most aggressive method, mainly earning from exchange rate differentials rather than interest. Due to low volatility in currencies, margin trading usually employs leverage of 50-200 times.

Features:

• 24-hour trading, T+0 mechanism
• Low entry barrier, can trade online with a small margin
• Can trade various currency pairs globally (e.g., AUD/USD, EUR/USD, etc.)

Risk warning: Leverage is a double-edged sword, amplifying losses. It’s recommended that leverage on major currency pairs not exceed 30 times to avoid margin calls. Most importantly, set stop-loss points to prevent losses from expanding.

Why are so many people buying US dollars and foreign currencies?

Low barrier to entry: Opening a foreign currency account is easy, available at bank counters or via apps. Once you have an account, you can start investing.

Hedging function: If all assets are denominated in TWD, a significant depreciation of the TWD will shrink your wealth. To diversify risk, every investor should allocate some foreign currency assets.

More transparent and fair: Foreign currency trading involves investors worldwide, making it hard for a single force to manipulate the trend, compared to stock trading, it’s more fair.

24-hour trading: The forex market operates around the clock. When you see a price movement unfavorable to you, you can stop loss at any time. Compared to fixed stock trading hours, foreign currencies are more flexible.

Interest rate differential attraction: Taiwan has long been in a low-interest-rate environment, while currencies like USD and AUD have relatively higher rates. This interest rate differential is enough to attract investors.

What foreign currencies do Taiwanese people love to buy?——12 mainstream options

Taiwanese banks generally offer 12 foreign currency investment options, including USD(USD), AUD(AUD), CAD(CAD), HKD(HKD), GBP(GBP), CHF(CHF), JPY(JPY), EUR(EUR), NZD(NZD), SGD(SGD), ZAR(ZAR), SEK(SEK).

These currencies can be divided into four major categories, each with different investment logic:

Policy currencies——USD, EUR

The exchange rates of these currencies are mainly influenced by central bank policies. When the Fed cuts interest rates, the USD usually depreciates; when it raises rates, it appreciates. Investing in these currencies requires paying attention to central bank interest rate decisions.

Safe-haven currencies——JPY, CHF

These two countries have developed economies and stable politics, with rarely changing interest rates. During global economic uncertainty, investors buy these currencies in large quantities for hedging. That’s why JPY and CHF often appreciate during crises.

Commodity currencies——AUD, CAD

These currencies are highly correlated with commodity prices. Australia is the largest exporter of iron ore, so when iron ore prices rise, the AUD appreciates; when prices fall, the AUD depreciates. The trend of these currencies is relatively easier to grasp, making them more suitable for beginners.

Emerging market currencies——CNY, ZAR

These currencies have the highest interest rates and are attractive, but political instability, large exchange rate fluctuations, and low liquidity make them riskier. Be especially cautious when choosing, and avoid “earning interest rate differential but losing from exchange rate movements.”

Suggestion: Beginners should start with highly liquid and relatively stable currencies like USD and AUD, rather than chasing the highest interest rates immediately.

Latest exchange rate trend analysis——Investment opportunities in 2025

EUR/USD(

EUR/USD is the most traded currency pair globally, reflecting the competition between the US and the EU economies. Recently, the Fed has started cutting rates, while the European Central Bank maintains steady rates and is optimistic about economic prospects. Under this policy divergence, the euro has risen to a four-year high.

The market believes US policy uncertainty is rising, while the ECB’s stance is relatively steady, making the euro more attractive.

) USD/JPY###

The yen is a common tool for carry trade——borrowing in low-interest-rate countries and investing in higher-interest countries for profit. But the Bank of Japan’s pace of rate hikes is slower than the Fed’s, which will narrow the US-Japan interest rate gap. In the short term, USD/JPY may remain volatile.

( GBP/USD)

The pound has strengthened mainly due to a weak US dollar, not because of improved fundamentals in the UK. As Fed policies become clearer, the GBP bullish trend faces re-pricing risks. Considering the UK’s sluggish economic growth, the GBP is likely to remain in a range.

( USD/CHF)

The Swiss franc is a classic safe-haven tool. As the US faces trade and fiscal difficulties, the USD’s safe-haven attribute is challenged, and the CHF has an obvious appreciation trend. In the medium to long term, slowing US economic momentum and Fed rate cuts will continue to support the Swiss franc.

Five major drivers of exchange rate fluctuations

To profit in the foreign currency market, you must understand why exchange rates fluctuate:

1. Inflation rate: Countries with low inflation tend to see their currencies appreciate because prices of goods and services rise slowly, maintaining strong purchasing power.

2. Interest rates: Rising interest rates attract foreign capital inflows, causing the currency to appreciate.

3. Government debt: Countries with high debt levels see foreign investors fleeing, leading to currency depreciation.

4. Trade conditions: Countries with rising export prices and falling import prices will see their currencies appreciate.

5. Political stability: Countries with low political risk and sound institutions attract more foreign investment, causing their currencies to appreciate.

How can beginners profit by buying foreign currencies? Practical strategies

Step 1: Choose target currencies

Analyze whether you want to go long or short on certain currency pairs, study the policies, interest rates, and main export products of the two countries. For example, if you expect the Fed to cut rates and Japan’s rates to stay unchanged, you might go long JPY/USD.

This step is the most important because it determines your entire investment logic.

( Step 2: Develop a trading strategy

• Determine entry and exit points
• Set stop-loss to prevent large losses
• Set take-profit to lock in gains
• Consider market risks and transaction costs

) Step 3: Master the timing of entry

Avoid chasing highs or selling at lows. The best approach is to wait until the trend is clear before entering. Usually, a trend takes more than 5 minutes to form, and once it does, you can establish positions accordingly. Depending on your trading style, you can refer to charts of 5-minute, 30-minute, or 2-hour timeframes.

Step 4: Keep a stable mindset

Don’t make impulsive decisions due to market volatility. Continuous learning and practice are essential to accumulate real experience in foreign currency trading.

Five major tips for foreign currency investment

1. Don’t touch currencies you don’t understand: Beginners should only invest in major currency pairs like USD, JPY, which have the highest trading volume. Avoid blindly chasing high interest rates.

2. Constantly monitor exchange rate movements: Foreign exchange rates fluctuate constantly, influenced by market, economic, and news factors. It’s recommended to follow international financial media like CNBC, Bloomberg regularly.

3. Diversify your portfolio: Don’t put all your funds into one foreign currency. For example, while holding USD fixed deposits, you can also allocate some funds to AUD funds to hedge risks.

4. Learn to set stop-loss and take-profit: Especially in margin trading, setting reasonable stop-loss points is crucial. You can base them on previous highs or lows. It’s recommended to operate no more than twice a day.

5. Pay attention to entry timing: After planning your trades, execute step-by-step. Be patient if the timing isn’t right. The simplest approach is to wait for a clear trend before entering.

Foreign currency investment has no shortcuts. The best way to practice is to test your trading strategies on demo accounts, evaluate their effectiveness and risk control in real market conditions, without risking real funds.

If you are ready to step into the world of foreign currency investment, remember a core principle: Choose good currencies, develop strategies, strictly control risks, and opportunities for profit from interest rate and exchange rate differentials will naturally come.