The South African Rand is one of the top 20 traded currencies in the foreign exchange world-wide and is quickly becoming one of the most liquid markets globally.
According to recent surveys, the SA Rand makes up 1% of the total traded currencies that take place every day, which accounts for approximately $21 billion (0.3%) of the total turnover of the daily foreign exchange market.
When considering that more than half of the Rand’s trade takes place internationally and that the other most traded currencies are mostly from countries with much larger economies than South Africa, such as the United States, this is quite impressive.
In the past 10 years, the international demand for the SA Rand has grown with more than 180%. This is mostly thanks to global financial centres from the Unites States, the United Kingdom, Germany and others.
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Local demand for the SA Rand is driven by South African banking institutions, other financial companies and retail traders.
The percentage of retail traders from South Africa has increased a great deal since the COVID-19 pandemic, as the South African government, like many other governments around the world, was forced to implement lockdown.
This affected the economy greatly, resulting in companies having to shut down and some residents left without remuneration, forcing them to search for other possible means of income.
The foreign exchange market is easily accessible, traded 24 hours a day, seven days a week, and with just a small deposit, the opportunities to make a vast some of money are endless, prompting more South Africans to start trading these markets in the passing months.
The Financial Sector Conduct Authority (FSCA), the financial authority of South Africa, allows high to unlimited leverage for traders who choose to trade with brokers regulated by the FSCA.
As leverage may potentially result in maximised profits and some financial authorities do not allow leverage ratios as high as the FSCA, locally and international traders started looking to brokers operating in South Africa to cater to their foreign exchange needs.
ZAR, the term used for the South African Rand, became one of the top traded currencies as South Africa has one of the strongest economies on the African continent.
Although it is a volatile market, it is also a very liquid, and speculators trading on the foreign exchange market see substantial financial opportunities when trading the ZAR against major currencies such as the USD.
Both a strong and weak ZAR hold opportunities for traders when market movements are predicted correctly.
For example, a weak ZAR currency will result in the country exporting more as South Africa boasts a diverse economy, which will strengthen the manufacturing sector.
A weak ZAR will also allow for more tourism once the restrictions surrounding the global COVID-19 pandemic being to ease. Foreign tourists exchange their currency for the weakened ZAR, allowing for greater purchasing power as tourists spend more.
On the other hand, the ZAR can sometimes prove to be resilient despite analytical forecasts, and as long as trades are favourable and South Africa’s economy remains stable, so will the ZAR.
By using leverage very carefully, keeping forecasts in mind, using fundamental analysis and keeping a close eye on developments in the economy, trading the ZAR can hold great financial results for traders.
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