When it comes to trading foreign currency pairs, everyone knows the heavy hitters; pairs such as GBP/USD, Eurodollar or DollarYen immediately spring to mind.
For many FX traders, it seems that the world revolves only around a few major currencies; we’re talking USD, Sterling, Euro, Swiss Franc, and Yen – and to a slightly lesser extent, Yuan and the three ‘other’ Dollars – CAD, AUD and NZD. But it’s a big world out there, and in an era where we’re continuing to see significant action and volatility outside of the well-travelled Forex highways it’s sometimes good to take a step back and remember that there are other countries – and other currencies – out there.
Let’s have a look at a few currencies which, though they may not be as widely traded as the primary pairs, still deserve to have greater attention paid to them.
Rouble – It’s been a precarious 12 months for Russia, with a takeover of the Crimea and subsequent forays into Eastern Ukraine leading the EU and US to respond with financial sanctions. This in turn has caused the Rouble to slide; it seems like every other week the Russian currency is hitting a new record low against the Dollar.
Much depends on the actions of President Vladimir Putin in the coming months. If we see a lasting peace agreement, then the Rouble may begin to recover. However, if things remain as they are, with the constant tension broken only by semi-regular flare-ups, the Rouble may stay at around its current level – and in the event of further sanctions, it could fall even further.
South African Rand – Earlier this year South Africa lost its status as Africa’s largest economy, with Nigeria now ahead by a significant margin. Perhaps unsurprisingly, the Rand has been having a tough time recently, with hits attributed to a resurgent US Dollar, a burgeoning account deficit and the forthcoming retirement of the President of the SA Central Bank. Pessimists would say that the rand is only going to fall further, whilst optimists would probably hold out for a ‘darkest before dawn scenario’. I say – we’ll have to wait and see.
Krone/ Krona – For many years the words ‘Scandinavian countries’ and ‘success story’ were pretty much synonymous. Successes these countries may have been, but that didn’t help them escape the ‘07 Financial Crisis when it rolled into town. Although not forgetting the existence of Iceland and Finland, the main Scandinavian currencies when it comes to FX trading are the Danish Krone (DKK), the Norwegian Krone (NOK) and Swedish Krona (SEK).
SEK – National elections a couple of weeks ago left Sweden with a hung parliament and saw the Krona drop. Interest Rate cuts earlier this year didn’t help either, with SEK subsequently weakening against USD. An announcement over this past weekend of the formation of a new coalition government may see further movement for the Krona – one way or the other.
DKK – It’s been a tough few years for Denmark as it’s attempted to emerge from the financial crisis; the government is hoping that the country’s noticeable efforts to maintain a grip on the deficit at the same time as balancing caution with necessity regarding stimulus measures will eventually work in its favour. In the meantime, however, DKK struggles.
NOK – A recent decision by the Norwegian Central Bank to rule out interest rate cuts for the near future has worked in the currency’s favour, as NOK subsequently strengthened against Sterling.
You may have known some of these things already, but what should hopefully be clear from this article is that when it comes to FX trading traders have far more options than they might think. Next time we’ll have a look at some other currencies and current economic or geopolitical events which may be affecting them.