Forex and Binary trading are newest tools to play with your investment money. I would say Forex movement is little more predictable than a stock movement. But believe me making money consistently out of a trading is a hard task. You need to have a trading mindset to succeed at Forex trading. In this article, we’ll talk about the latest trend in Forex marketplace, the trend towards smaller currencies or currencies which were traditionally traded in low volume.
If you’ve traded forex for a length of time, you’re familiar with the seven traditional currencies that trade most frequently: the U.S. dollar, the Japanese yen, the euro, the British pound, the Australian dollar, the Swiss franc, and the Canadian dollar.
But, did you know that there are seven more on the horizon that are poised to take the market by storm? It’s true. And, if you’re not ready for them, you could be missing out on huge profits. Huge.
The Challenge To The Status Quo
The seven major currencies are currently being challenged by what many would think should be smaller countries. But, if you look at them, they are countries that are growing out of their shell. First up is the Brazilian real.
No one really gives Brazil the respect that it deserves. Its economy is impeccably resilient and so is its currency. Next is the Russian Ruble. Say what you want about Russia, but it’s survived its communist past and is still one of the largest countries in the world. The Indian rupee is finally getting a shot.
Indians have been quietly amassing a lot of wealth and, even though some question over corruption exist within the government, its economy is not as fragile as some believe it to be.
The Chinese Renminbi (or Yuan) is another currency that’s being hit lately and resulted in a downward motion, which is still expected to be continued.
The Mexican peso is an unlikely contender, as are the Turkish lira, and the South African rand. It seems counter-intuitive, but if you think about it, these make sense.
Turkey is incredibly rich and is the home of the largest bizarre in the world. South Africa is also coming into its own, as is Mexico.
Most Forex trading platforms will let you trade in the basic, stable currencies right now, but not all of them give you good access to the newer currencies.
If you want to hop on this bandwagon, look for brokers that have the capital to trade in these under-served markets.
Possible Reasons For Their Rise
Some traders speculate that these smaller currencies are starting to look more serious because of leveraged carry trades. In other words, some investors are borrowing money in one currency to trade in another.
And there is some truth to this assertion. Most of the new currencies offer high-interest rates which are ideal for the carry trade. For example, Brazil’s interest rate is 14.25 percent. India sits at 7.25 percent.
Contrast this to the U.S., which has an ultra-low 2.18 % rate on the 10-year Treasury. But critics point out that the reason these currencies have high-interest rates is because of the inflation in these countries. But, look at the budget deficit – on average, it’s just 4 percent.
There is some concern that a right-aligned U.S. monetary policy would make it hard for these newcomers to attract foreign capital to fund their deficits. In fact, this is what led to steep declines in their currencies in 2013 and 2014.
What’s Driving Forex Turnover?
Turnover in these currencies is probably driven by a combination of things like exceptional demand for OTC Forex derivatives, the “financialization” of EME currencies, and “internationalization” of the emerging market currencies.
Only time will tell, but if these economies continue to grow, it will be a good sign for Forex traders looking for new blood.
Be on Top of Things
If you’re a Forex trader, always try to be on top of latest economic and industrial news. not only for the country you live in but for all the countries that you are interested in trading currencies for.
For example, the recent market condition in China, its growth being milder than what it used to be. You can read about recent political changes in India, etc.
Readers, tell us more about your experience in Forex trading.