Exchange Rate Now!

With South Africa hosting the 2010 World Cup, it is no doubt in the travel plan of most tourist in football obsessed United Kingdom (which includes England, Scotland and Ireland). In fact, South Africa is already experiencing a boom in tourists from the United Kingdom now, one year before the World Cup even starts!

Besides the World Cup, there is another factor which may account for the rise in tourist numbers – The favourable exchange rate. The South African Rand is now trading at about 12 Rand to 1 Sterling Pound. This exchange rate is currently more favourable towards the Sterling Pounds compared to other major currencies like the Euro and US Dollar.

Some worries that the South African Rand will move to a downtrend against major global currencies (which include the Sterling Pound) once the World Cup concludes in 2010 (more…)

During the global economic/financial crisis that started in late 2008, many investors liquidated their positions into cash holdings and purchased heavily into both the Japanese Yen as well as the US Dollar, leading to a higher exchange rate for these 2 currencies against the rest of the global currencies.

For example, 1 Australian Dollar was trading at 56.4 Japanese Yen in February 2009. The Australian dollar (as well as the rest of the global currencies) has recovered and is now trading at 1 Australian Dollar compared to 77.5 Japanese Yen.

Similarly, 1 Australian Dollar was trading at 0.63 US Dollar in February 2009. The Australian dollar has recovered and is now trading at 1 Australian Dollar compared to 0.82 US Dollar.

The US Dollar (USD) and the Japanese Yen (JPY) are among the most traded pair of currencies in the world. Amongst themselves however, the exchange rate fluctuations is (more…)

Since there is no global currency in use, there is a need for a stock market equivalent for trading of foreign currencies. Forex, otherwise known as the foreign exchange market or FX, is used to trade currencies. Major currencies being traded include the United States dollar USD, Euro EUR (€), Japanese yen JPY (¥), Pound sterling GBP (£), Swiss franc CHF (Fr), Australian dollar AUD ($), Canadian dollar CAD ($) and the Swedish krona SEK (kr).

Key participants in the forex market include banks, commercial companies (usually with a global presence), Central banks, hedge funds and Money Transfer/ Remittance companies - where each of these participants has an agenda of their own. For example, commercial companies trade global currencies to hedge their profits against exchange rates fluctuations, while hedge funds simply operate in Forex for profit. Collectively. financial power of these participants dwarfs that of a retail investor, which is why only sophisticated investors participate in forex trading.

Internal, regional, and international political conditions and events can have a profound effect on currency markets. For example, the political instability in Thailand means that less people are willing to trade in Thailand, reducing long term demand for the Thai Baht. This means that in the long run, the Thai Baht may depreciate further against major currencies. In forex, this translates into a simple supply-demand curve. Less demand for the Thai Baht means a certain depreciation in Baht value globally.

Forex trading is deemed to be risky. Due to the small margin in profit (as currency do not fluctuates as much as shares), investors will often buy/sell in Hugh quantities to ensure a reasonable return in absolute profits. The large exposure in trade poses a risk to such investors, as any unexpected global events can spark a significant loss/gain to the investor.