The global currency markets suffered sharp fluctuations in 2014, as numerous developments combined to help create intense volatility.
Falling Oil Prices
Oil prices declined sharply, undermining the currencies of nations that produce the raw material. The commodity neared $50 per barrel during the year, falling to its lowest price since the Great Recession.
Central Bank Policy
Central bank policy also played a key role in the intense gyrations that afflicted foreign exchange markets. The Federal Reserve wound down its latest round of quantitative easing, the European Central Bank considered starting a new round of bond purchases and the Bank of Japan, which was already using substantial stimulus, announced plans to intensify this activity.
Russian Economic Turmoil
Another major event that impacted currency markets was the economic turmoil faced by Russia. In 2014, the world's largest nation suffered sanctions imposed by both the U.S. and the European Union. In addition to coping with this challenge, Russia encountered headwinds due to falling oil prices.
Russia was not the only place that endured economic hardship. Europe experienced stagnant economic growth during the year and grappled with dilemmas about how to use policy to improve conditions in the country.
Now that we have delved into some of the major variables that helped create turbulence in the forex market, let's take a look at the top 10 most volatile currencies of 2014. For the sake of simplicity, this article ranks currencies by how much they fluctuated relative to the U.S. dollar.
1) The Russian Ruble
The Russian ruble plunged in 2014 as the nation suffered harsh economic challenges. While many have blamed sanctions and a sharp drop in oil prices, some have also pointed to domestic policy as helping cause Russia's economic difficulties.
For example, the damage caused by falling crude helped illustrate the country's failure to broaden its export base. In addition, many global market participants grew worried when the Russian government threatened to confiscate assets owned by foreign parties. Amid these concerns about how easily the country's economy could recover, many lenders refused to renew loans.
While the U.S. dollar bought 33 rubles near the beginning of the year, it purchased 67 toward the end. As a result, the greenback surged 87% relative to the ruble, which means the Russian currency endured the single greatest drop relative to the buck.
2) The Argentine Peso
The Argentine peso had a tumultuous year, as black market activity helped spur exchange rate fluctuations. The emerging-market currency fell in value for most of 2014, but it changed direction and started rising when the nation's government appointed a new president for its central bank.
The U.S. dollar surged 30.3% relative to the Argentine peso, buying 6.6 units of this currency at the start of 2014 and roughly 8.6 at the end.
3) The Colombian Peso
The Colombian peso encountered some sharp declines as the price of oil, its largest source of foreign exchange, fell significantly. Amid this development, the nation's trade deficit surged from $66.2 billion in the year through September 2014 to $449.6 billion during the same period through September 2015, an increase of more than 500%.
While the greenback was worth 1923 Colombian pesos at the start of 2014, this exchange rate rose to 2399 near the end, representing a gain of 24.8%.
4) The Norwegian Krone
Oil and natural gas provide the Scandinavian country with roughly one-quarter of its economic activity, and Norwegian krone was yet another currency that ran into trouble as oil prices declined.
Amid these challenges, Oeystein Olsen, Governor of the nation's central bank, stated during an interview that as long as Brent lingered below $70 a barrel, it would create headwinds for the Norwegian economy.
The U.S. dollar-krone exchange rate increased 24% between the beginning of 2014 and the end, rising from 6.14 to 7.6.
5) The Hungarian Forint
The Hungarian Forint plunged against both the U.S. dollar and euro as Russia, which government figures reveal bought 753 billion forint worth of goods and services from Hungary in 2013, suffered geopolitical uncertainty.
Because of this strong relationship between the countries, cross-border tensions between Russia and Ukraine posed a serious threat to Hungary's economy.
The greenback started out the year at 218.1 forint, before rising to 266 near the end of 2014, a 22% gain.
6) The Polish Złoty
In 2014, Poland's central bank cut several interest rates as the nation coped with deflation. In October, the National Bank of Poland opted to reduce its benchmark interest rate to an all-time low of 2% and trim two other rates.
The U.S. dollar bought 3.03 zloty near the beginning of the year, and this exchange rate later climbed to 3.59, a 18.48% gain.
7) The Japanese Yen
As Japan's economy continued to show signs of weakness in 2014, the nation's central bank announced plans to step up government stimulus. While the BOJ had been buying between 60 and 70 trillion yen worth of assets, the financial institution increased this target to 80 trillion.
Amid these efforts, the dollar surged against the yen, the exchange rate rising 16.3% from 103.8 to 120.7.
8) The Brazilian Real
The Brazilian Real suffered volatility amid concerns about economic growth. The nation's GDP rose a meager 0.1% in 2014, a sharp contrast to the 7.6% growth Brazil logged a few years earlier in 2010.
Amid these challenges, both Standard & Poor's and Moody's Investors Service weighed in on Brazil's economic state. While the former slashed the nation's sovereign debt rating, the latter changed its outlook for the country to negative.
As the nation coped with these challenges, the U.S. dollar surged 14.83% versus the real, climbing from 2.36 in the beginning to 2.71 near the end.
9) The Mexican Peso
At the start of the year, Mexico's Finance Ministry predicted the nation's GDP would experience 4% growth in 2014.  However, the Finance Ministry lowered this estimate several times. In the end, Mexico's output grew 2.1% in 2014, nearly 50% below the original estimate.
As global markets watched these forecasts fall repeatedly, the greenback rose 14.74% against the peso, increasing from 12.96 to 14.87.
10) The Euro
The eurozone continued to face economic difficulty in 2014, suffering weak growth and inflation that was barely noticeable. The 19 nations in this consortium coped with several headwinds, ranging from the impact of Russian sanctions to cooling growth in emerging markets.
During the year, the U.S. dollar surged 13.7% versus the euro, rising from 0.73 to 0.83.
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Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…