The forex market is the most valuable market in the world and while a significant amount of the total trade volume is always on the major currency pairs, traders are increasingly looking to alternatives.
Forex professionals usually recommend that beginners start off their forex trading career by trading the major currencies.
A combination of a sluggish recovery from recession, political upheaval and public sector cuts has affected the strength and solidity of the pound in recent months. The euro has been experiencing its own problems, with sovereign debt and the large disparity in economic productivity between member nations at the core of them.
Over in the US the dollar has been under pressure thanks to recent negative economic data, notably weak non-farm payroll figures, the occurrence of which have snowballed in recent weeks and re-ignited fears of a double-dip recession..
In uncertain times forex traders will look toward a major currency pair which is enjoying the most stable relationship. The continuing strength of the yen against the dollar has provided a welcome retreat for wary forex traders.
The yen is very attractive to investors at the moment as Japanese interest rates are close to zero, meaning that traders are borrowing the yen and using it to fund leveraged carry trades, that is they are taking advantage of Japan’s low interest rates and by borrowing and then using their yen to buy financial products with a higher interest yield.
Depending on the leverage used, profits can be substantial – any fear of a change in the exchange rate can then be hedged.
As the majors are relatively unstable at the moment, forex traders have also been looking at alternative currencies. According to the Commodities Futures Trading Commission positions on the Mexican peso, Polish zloty and the Canadian dollar have all increased in volume over the last few months.
To find out more about how to take a position on the world’s forex markets by CFD trading and more about forex pairs, major and minor, visit www.igmarkets.co.uk.