Today traders and investors show interest in developing countries. Investing in currencies and shares of emerging nations (even though they are highly volatile) is no worse than investing in assets of developed countries.
South Africa, Indonesia and Brazil are of special interest among traders. The demand for these countries increases and results in making the Indonesian rupiah, the Brazilian real and the South African rand attractive for hedge funds and large institutional speculators, as well as for retail traders on the international Forex market.
This is due to the fact that dynamics of national currencies of developing countries is almost the same as performance of the most popular and frequently traded currencies of developed nations, because the change in quotes in both cases depends on the country’s monetary policy, along with internal and external factors. A trader experienced in such established and reputable currencies as the U.S. dollar, the euro, the Japanese yen and the Swiss franc, can easily adapt for emerging markets.
There are some features emerging economies’ assets:
every currency has a certain time of the day when it increases in liquidity and activity;
changes in quotes similar to the changes in currency pairs with the pound sterling: in the London session the pound is higher, while during the Asian session it is lower;
the price of the South African rand rises during the London session and drops in the middle of the American session.
The central bank manages the country’s monetary system in most of the developing countries, but price quotes of some currencies directly depend on a basket of currencies of the partner countries. It is also possible to observe the reaction of exchange rates on interest rates’ changes. For example, South Africa and Mexico are changing interest rates depending on the producer and consumer prices and the overall industry growth, while Brazil sets high interest rates to stimulate investments in its national economy. Such policy helps to maintain a narrow range of currency pairs quotes - intraday fluctuations range from 30 to 50 pips.