The Rand to US Dollar (ZAR/USD) is known as an exotic currency pair in forex trading. This is because the Rand (ZAR) is an emerging market currency that carries less Minimum size 1. Contract size USD , One Pip means ZAR/USD. Value of one Pip ZAR 10 (GBP ) Margin 5%. Minimum stop distance Minimum guaranteed stop distance % Technical Analysis Summary for U.S. Dollar/South African Rand with Moving Average, Stochastics, MACD, RSI, Average Volume
South African Rand Exchange Rate - US Dollar - Historical Exchange Rates
Home » Uncategorised » Factors that affect the Rand to Dollar exchange rate. There are a number of factors that affect exchange rates, such as inflation rates, interest rates, investor sentiment, forex rand dollar, supply and demand, economic growth, political sensitivity and market volatility. Currency volatility is what makes forex trading so exciting and so risky, forex rand dollar.
More volatility means more trading risk but also more opportunity for profit. We have a look at what factors affect the Rand to Dollar exchange rate and what trading strategies are best to trade this exotic currency pair. The level of inflation in South Africa has a direct impact on the Rand to Dollar exchange rate. In fact, inflation is one of the key economic indicators that forex traders in Africa monitor very closely.
Inflation is linked to a general increase in prices and is measured by the consumer price index. The monthly and annual inflation is calculated within a country using the percentage change in the index between two given periods. The country with the higher inflation rate has a currency that loses value and depreciates while the country with the lower inflation rate forex rand dollar a currency that gains value and appreciates.
When inflation is too high in a country, interest rates go up, forex rand dollar. When inflation is too low — known as deflation, interest rates go down. Deflation causes the currency to appreciate. When the interest rates rise in South Africa, it becomes more attractive for US investors to deposit and save money in the country because they get a better rate of return than keeping it in the United States. Therefore, demand for the Rand rises.
As you know, speculation largely drives forex trading. In other words, whether the forex market is feeling buoyant or jittery about the Rand to Dollar exchange rate, forex rand dollar. When there is a deficit on the current account of a country, the value of imported goods and services is greater than the value of exports. This means a country is spending more on importing goods and services than they are receiving money from exports.
However, if South Africa battles to attract enough capital inflows to finance the current account deficit, the value of the Rand will depreciate. Devaluation of the Rand causes inflation but it also increases demand for exports because goods and services are cheaper for US businesses. The value of government debt in South Africa can affect the Rand to Dollar exchange rate because investors are wary that the government will default on its debt.
This will cause foreign investors to sell their bonds which will cause the value of the Rand to fall even further.
If investors in the US expect the interest rate in South Africa to fall, the country becomes less attractive for investors to save money, forex rand dollar. Hot money generally leaves South Africa and moves to countries with higher interest rates.
When hot money flows out of South Africa, investors sell Rands and buy other stronger currencies. This causes the value of the Rand to fall further.
Basically, a recession causes a fall in the value of the Rand and drives down investor confidence in South Africa. A well-governed country that is politically stable should have a stable and strong currency. A country that is at low risk of political unrest is far more attractive to foreign investors.
Political turmoil and instability destabilises an economy and weakens its currency. Forex rand dollar the civil unrest in South Forex rand dollar in mid as an example. The economic fallout from the civil unrest will be significant for the South African economy and this will do nothing to inspire confidence in US investors. The Rand should strengthen when South African exports are popular and in demand, forex rand dollar.
A strong trade industry drives up investor confidence which results in a well-performing currency. However, if there is forex rand dollar abundance of supply and less demand for South African export goods and services, forex rand dollar, the affect on the value of the Rand is disastrous, forex rand dollar. In the same vein as supply and demand, the value of the South African Rand can be determined by how many people are trading it.
When demand for the Rand increases, the value of the Rand increases. An exchange rate is how much it costs to exchange one currency for another. Exchange rates fluctuate constantly throughout the week as currencies are actively traded. This pushes the price up and down, similar to other assets such as gold or stocks. For example, if you are travelling to the United States, how many US Dollars would you get for a certain amount of Rands?
If you are importing goods, how much Rands would you have to pay to meet the US Dollar price of goods? The difference between these two examples is based on which currency is the base currency and which one is the quote currency.
This is because the Rand ZAR is an emerging market currency that carries less liquidity than a developed market currency. Forex rand dollar US Dollar USD is a major currency because it carries the highest liquidity in forex trading and is by far the most popular currency to forex rand dollar. Exotic currency pairs include one major currency alongside a currency from a developing or emerging market.
The Rand paired with any major currency becomes an exotic pair. Exotic currencies are also known as alternative or third-world currencies.
They can forex rand dollar forex traders exciting opportunities because they have potential for higher returns than other currencies. On forex rand dollar flip side, exotic currencies also carry higher risk of loss. It can be expensive to trade an exotic currency because the bid-ask spread is usually large to compensate for the lack of liquidity.
However, lower liquidity does offer higher opportunities for profit if traded with caution. Exotic currencies like the Rand carry a wider spread because they carry lower liquidity than the most-traded major currencies. The major currencies are the US Dollar, British Pound, Euro, Swiss Franc, Japanese Yen, Canadian Dollar and the Australian Dollar.
The rule of thumb is forex traders like to trade major currency pairs in more volatile trading conditions because they tend to me more stable, and they trade exotic currencies when the major currency pairs are stagnant and there is low forex rand dollar volatility. Trading exotic pairs in volatile markets is risky and brokers usually require higher margin to cover the risk. There are three trading strategies that work best if you want to trade an exotic currency pair like forex rand dollar Rand to Dollar.
Trend trading is a popular trading strategy for exotic currency pairs. Forex traders identify an overall trend forex rand dollar go either long or short on a position, depending on whether the trend is bullish or bearish.
A trend trading strategy relies on technical analysis rather than fundamental analysis. Breakout trading is forex rand dollar popular strategy for trading exotic currency pairs but you need to be careful that a breakout is not a false breakout. A breakout trading strategy relies on forex rand dollar fundamental and technical analysis to forex rand dollar on price movements once it breaks through a historical level of support and resistance. The most popular chart patterns to use for breakout trading are pennants, wedges and ascending and descending triangles.
Range trading is where a forex trader seeks to profit from the peaks and troughs within the range by going either long or short on a position. Range trading involves trading within a set range of support and resistance. Traders who use the forex rand dollar trading strategy to trade an exotic pair like the Rand to Dollar couple use chart patterns such as wedges and triangles to speculate on price movements.
Forex and CFDs are complex instruments and trading these instruments involves a high risk of losing money rapidly due to leverage. You need to understand how forex trading works and decide whether you can afford to take the risk of losing money on trade orders that do not go your way. Forex Trading Africa annually reviews brokers and financial instruments, and provides information to help traders and investors make better decisions when trading on global markets. The information provided is purely to grow your knowledge and expertise in financial trading.
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Interest rates When inflation is too high in a country, interest rates go up.
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Technical Analysis Summary for U.S. Dollar/South African Rand with Moving Average, Stochastics, MACD, RSI, Average Volume Minimum size 1. Contract size USD , One Pip means ZAR/USD. Value of one Pip ZAR 10 (GBP ) Margin 5%. Minimum stop distance Minimum guaranteed stop distance % Current exchange rate US DOLLAR (USD) to SOUTH AFRICAN RAND (ZAR) including currency converter, buying & selling rate and historical conversion chart
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