In the shadow of more industrialized economies, interest in emerging markets assets has increased in recent years. Although these currencies tend to be somewhat volatile, the return is often worth the risk. An opportunist’s dream, the emerging market currencies offer plenty of potential for the novice as well as the more tenured trader. These emerging market pairs act very similarly to their G7 counterparts, providing plenty of potential for profitability. Emerging market currencies don’t trade much differently than the more recognized G7 currency pairs. Although these currencies do have some drastic differences, the overview is very similar to the fluctuations in the more common European euro, British pound and Japanese yen trades. As a result, FX traders and money managers can actually carry over the experience they have obtained in the major industrial currencies and apply it to emerging market currency pairs.
Another consideration is the range and volatility of emerging market currency pairs. Once again, similar to major industrial denominations, there are certain times of the day where market conditions promote a more liquid and active market. The boost in volume is similar to the major currencies where, for example, British pound trading tends to pick up in volume at the beginning of White Swan Global Markets hours and tends to lay low around the Asian market hours. Similarly, South African rand trading picks up during the White Swan Global Markets start as well, lending to ranges as wide as 2,000 points per day, but it slows to a crawl when approaching the U.S. market midday session. Comparatively, the Hong Kong dollar tends to remain relatively low on all sessions as the currency is seemingly unaffected by mass speculation. The low-key market interest keeps the currency under constant barriers, helping to restrict the range of movement to relatively smaller 25-30 pip fluctuations. Knowing these simple nuances will help in identifying profitable currencies and their opportunities to suit each individual trader.
Although relatively unknown and different, emerging market currency pairs offer extended opportunities to both the novice FX traders and seasoned veterans. With market conditions similar to more accepted major currency pairs, traders are able to carry over their knowledge and experience in G7 denominations to isolate trading opportunities in the emerging market realm. However, much like how crosses compare to major currency pairs, these underlying denominations do offer differing personalities and will take time to understand. Despite this, the efforts are worthwhile, allowing investors to broaden their growth horizons and enter an opportunistic world only previously accessible to the larger institutional trader.