Trading the ZAR
Trading The South African Rand (ZAR): It’s no surprise that the South African Reserve Bank (SARB) was influenced by its former colonial government’s banking model the British, of course, Bank of England. The SARB is the voice of authority regarding monetary policy and activity for the Republic of South Africa. Acting upon major responsibilities in the same way as other central banks, it also behaves as a creditor when certain circumstances arise like intervention on foreign exchange markets, and acts as a clearing bank. It is the major custodian of gold. The SARB’s chief responsibility is, “the achievement and maintenance of price stability”.
It is a privately owned entity having in excess of 600 shareholders who are regulated to owning no more than 1% of the total number of outstanding shares as insurance for the interests of the economy, which precede those interests any private individual may have. In maintaining this policy, the SARB governor and the 14-member board lead the bank’s activities to make progress on monetary goals through six meetings annually.
Possessing relative volatility, average daily ranges in movement of the rand (ZAR) can hit 1,000 pips. This width of range isn’t as spectacular as it seems once it is translated as dollar pips, however, as they equate to the normal expected daily activity of the British pound. Knowing this, it makes a great pairing for trade against the ever-present US dollar (particularly if you consider its carry potential). Traders and investors also take into consideration the relationship that the rand has with both gold and platinum, major exports of South Africa. So, like the Canadian link with crude oil, there is similar speculation on commodities.
Conclusion To This Series on Trading Forex Currencies…
The Forex financial market is always in a process of evolution. Markets are growing, investors and traders are becoming increasingly aware of the opportunities foreign exchange transactions are providing. The Forex market has $3 trillion daily volume and it seems it will continue to grow in spite of the current economic turmoil. Whether conversion for physical trade or simply portfolio diversification play, trading foreign exchange currency (Forex) continues to afford plenty of opportunity to both the retail and institutional investor.
