Illiquid currencies tend to exhibit less volatile exchange rate movements than liquid currencies.

Question

Quizplus · Accepted Answer

Illiquid currencies typically have fewer market participants and lower trading volumes, which can lead to larger exchange rate movements in response to market events or news. Liquid currencies, on the other hand, tend to have more stable exchange rates due to higher trading volumes and a more diverse range of market participants.

Illiquid Currencies Tend to Exhibit Less Volatile Exchange Rate Movements