Currency Pairs of Interest: Exploring South Africa’s Forex Market Preferences
The value of one currency expressed in terms of another currency is known as a currency pair. Trading a currency pair involves purchasing one currency while concurrently selling another in the hopes of making a profit. The quoted currency is sold while the base currency is purchased.
If you’re just starting out in the foreign exchange markets, you’ll want to stick to trading only one or two of the major currency pairings traded in South Africa. Focusing on no more than two main currencies at a time can help you learn the ropes and become a great trader. As your comfort level and self-assurance grow, you’ll be able to expand your trading portfolio.
Read on to learn more about the most popular currency pairs traded in South Africa.
More than half of all trades in the foreign exchange market include the US dollar. When purchasing foreign currency through its international exchanges, governments tend to stock up on the US Dollar due to the strength of the currency.
The South African Rand is a widely used currency throughout the continent of Africa. The volatility of the South African Rand has made it a popular currency for forex trading SA.
The Euro/U.S. Dollar currency pair is the most actively traded pair in the world, ranking first among the “major” currencies. This duo, which includes the world’s two largest economies, has seen the most swings since the introduction of the Euro in 1999.
More than a third of all Forex trades involve the USD/EUR currency pair. This is due to the size, stability, and openness of the economies of the United States and the European Union.
One of the first trading pairs, GBP/USD has been around for a long time. The term “The Cable,” which refers to the exchange of British pounds for U.S. dollars, is often used to describe this currency pair.
One reason the US dollar and British pound are known as “The Cable” is that a communications cable laid beneath the Atlantic Ocean is used to coordinate the pair between the New York and London markets. Optical fibre cables and satellites now handle all communications over the Atlantic.
Both the British and American economies contribute to this currency pair’s resilience. Therefore, higher growth rates in the British economy will lead to a stronger Pound in comparison to the US Dollar. In contrast, a stronger U.S. economy will support a higher value of the dollar compared to the British pound.
Since the Swiss Franc is the last Franc to be printed in Europe, the currency pair USD/CHF is sometimes known as “The Swissie”. Switzerland has traditionally been a politically neutral country and a global financial hub.
The Swiss franc (CHF) is favoured by traders when market volatility is high but is ignored when conditions are calm. That’s why it’s not as actively traded at such periods as some others.
When the Swiss franc strengthens against the US dollar and investment rises, the price of the CHF/USD currency pair falls.