Creating a BRICS Reserve Currency: A Long-term Project Despite Russia’s De-dollarisation Strategy

Russia and other BRICS members – Brazil, India, China and South Africa – each have different approaches to making changes to establish an alternative non-dollar-denominated international financial system. Russia’s motives are tied to the growing pressure on its capital account following its full-scale war on Ukraine that has led to tougher international sanctions.

For the other BRICS – and countries aspiring to join the group including Egypt, Turkey, Algeria and, more recently, Saudi Arabia – de-dollarisation is a much less urgent goal. India has a closer relationship with the US than with some of the other BRICS members. Brazil and South Africa are less vulnerable to US sanctions.

China and the US remain dependent on each other for trade – China was the US’s third largest trading partner in 2022 January-September after Canada and Mexico – diminishing the logic for third countries to abandon the dollar.

Western measures to isolate Russia also complicate closer co-operation within the BRICS+ countries because of the risk to others of secondary sanctions.

In addition, not all BRICS+ countries have the necessary financial resources or political incentives to invest in the creation of their own non-dollar market infrastructures. Indeed, the most powerful Member States might promote the internationalisation of their own currencies at the expense of others.

Figure 1. Dollar dominates international monetary system; euro a distant second

Currency composition of the international monetary system, %

Source: ECB (The international role of the euro, June 2022), BIS, IMF, SWIFT, Scope Ratings calculations. Notes: The data for foreign-exchange reserves are for the second quarter of 2022; International debt and international deposits data are for the fourth quarter of 2021; Foreign-exchange turnover data as of April 2022; SWIFT data as of July 2022.

Renminbi, Not Rouble, Natural but Limited Beneficiary of De-dollarisation

Any common de-dollarisation strategy would inevitably result in greater use of the Chinese renminbi, making the group more dependent on China’s economic policies and much larger economy, equivalent to almost 60% of BRICS aggregate output. China launched crude oil futures contracts denominated in renminbi in 2018, and trading volumes are at times close to dollar contracts for Brent or West Texas Intermediate crude.

However, the Chinese currency lacks the international acceptance of the dollar or the euro (Figure 1). China’s central bank does not operate a fully floating foreign exchange regime with a lingering tendency to use capital account controls to manage currency flows, even after liberalisation steps are taken.

The dollar remains the dominant currency in almost every area of the current global financial system, with the euro a distant second. It seems unlikely that another currency will overtake the greenback or the euro any time soon.

Challenging dollar hegemony would require a reorganisation of the international financial system, well beyond trade relations, including the roles of Western-led international financial institutions such as the International Monetary Fund and the World Bank.

Strong Longer-term Incentives for Internationalising BRICS+ Currencies

The BRICS+ group has good longer-term economic and political incentives for reducing the dollar’s global dominance. BRICS countries account for 40% of the global population and one-third of the world economy on purchasing-power-parity terms. With Saudi Arabia, BRICS would have two of the largest oil producers, Saudi Arabia and Russia, and two of the largest oil consumers, China and India, increasing the potential to price mutual oil sales in local currencies.

Trade turnover within the BRICS+ is likely to continue growing. China’s foreign trade with other BRICS countries increased by 16% to USD 461bn in the first 10 months of this year compared with the same period in 2021, double the rate of overall growth rate of China’s foreign trade during the same period.

This opens the door for the gradual development of a non-dollar secondary financial system, helping the countries extend their respective spheres of influence. We will likely see efforts to bring BRICS national non-dollar financial infrastructures closer together, to increase mutual trade settled in domestic currencies and to improve co-operation with regional intergovernmental organisations such as the China-led Shanghai Cooperation Organisation.

However, creation of a common BRICS currency that performs the role of a store of value or reserves for central banks of middle-income market economies will remain a long-term challenge.

Figure 2. Risk premium: BRICS CDS spreads significantly wider than reserve-currency issuer countries’

CDS spread (bps), five-year, USD, as of 1 December 2022

Source: Bloomberg, Scope Ratings. *The data for Russia are as of February 1, 2022.

The market perception of risk, judged by sovereign credit default swaps, is significantly higher for BRICS than for reserve-currency issuers (Figure 2) – even excluding Russia, which defaulted on its foreign debt in June. Most BRICS+ countries have good reasons to remain within western financial spheres if only through memberships of international financial institutions.

For a look at all of today’s economic events, check out our economic calendar.

Levon Kameryan is Associate Director in Sovereign and Public Sector ratings at Scope Ratings GmbH.

High Debt Burden, Moderate Growth Potential Hinder Investment Grade for South Africa

Longer-run fiscal risk and moderate economic growth potential remain constraints for an investment-grade rating for South Africa – after Scope Ratings published BB+ ratings – the agency’s first public sovereign rating in Africa.

South Africa’s fiscal deficit is expected to come in at a better-than-anticipated 4.75% of GDP for FY2022/23 (compared with an earlier government target of 6% of GDP) although we expect this to rise to 5.2% in FY2023/24 and see it climbing during future years because of the rise in interest payments amid higher global rates.

Risks to the budgetary outlook include:

  1. A renewed recession bringing in lesser tax revenue, and ushering in poorer spending discipline.
  2. Higher wage settlements in view of elevated inflation.
  3. A further extension or permanent inclusion of the Social Relief of Distress grant – which the government believes could, in lieu of a permanent source of funding, impair sustainability of public finances.
  4. Greater-than-anticipated aid for struggling state-owned enterprises; and
  5. Higher-than-anticipated borrowing costs.

Substantial risks to the national fiscal framework need to be addressed. Current nominal primary expenditure ceilings, which are prudently announced three years in advance, are a credit strength, as is a robust debt and cash management strategy. But higher spending and failure to observe ascribed expenditure ceilings since FY2018/19 undermine faith in the fiscal framework. The adoption of any debt-ceiling rule could complement an existing fiscal architecture and enhance longer-run fiscal sustainability.

Net Interest Payments Are Seen Rising Above 20% of Revenue by 2024

Scope Ratings considers net interest payments as being a relevant indicator of debt sustainability – reflecting the weight of debt on operational budgetary resources. Net interest payments are expected to average around 18% of government revenue over the next two years before rising to above 20% by 2024. Sustained deficits have translated into a steady rise in the government debt burden, which is elevated by emerging-market standards.

Government debt is seen rising to 73.3% of GDP by 2024, before continuing to increase medium term (Figure 1). Hence, a government expectation in last month’s Medium-Term Budget Policy Statement for a peak of the public-debt ratio at 71.4% by the current fiscal year – two years earlier and nearly four percentage points lesser than previous government estimates – is subject to risk, especially ahead of 2024 general elections.

Figure 1. Debt-to-GDP forecasts, % of GDP

Source: IMF World Economic Outlook (WEO), Scope Ratings forecasts

Low Level of Sovereign Foreign-currency Debt Mitigates Effects of Currency Losses for Debt Sustainability

The rand is 7% weaker against dollar since the start of this year, although this has been mainly a dollar-strength phenomenon. The nominal effective exchange rate is largely unchanged. Scope expects the rand to depreciate a further 5% a year against the dollar between 2023 and 2027, close to its average rate of annual devaluation from 2012-21.

However, South Africa’s moderate level of sovereign foreign-currency debt mitigates effects from currency losses for debt sustainability, although an elevated participation of non-residents in the domestic debt market represents a further risk. Non-residents held 26.2% of South African domestic debt as of October 2022.

A Moderate Economic Growth Trajectory Looking Ahead

Following a post Covid-19 crisis rebound (4.9% growth in 2021), Scope Ratings assumes that economic growth eases to 1.8% in 2022 before 1.1% for 2023 (Figure 2). The latter is below growth potential of 1.5% a year. 1.7% growth is seen during 2024. A slower economic growth trajectory will prevail despite annual working-age population changes of 1.5% a year anticipated during 2022-27.

Figure 2. Real GDP growth (%)

Source: IMF WEO, Scope Ratings forecast

Growth remains anchored by economic re-openings from Covid-19, but this impetus fades as the international environment has become more challenging. Weak investment expenditure, long-standing energy and infrastructure bottlenecks (especially in rail), as well as labour-market rigidity weigh on growth potential.

Consumer price inflation came in at 7.6% in October, a slight increase from the 7.5% in September but less than the 7.8% print in July. Inflation is expected by Scope to stay above its 3%-6% target range until Q3 2023 (averaging 7.0% in 2022, 6.3% in 2023 before 4.6% in 2024) and to reach a mid-point of the target range only by mid-2024 – slightly ahead of current central-bank expectations.

For a look at all of today’s economic events, check out our economic calendar.

Dennis Shen is a Director in Sovereign and Public Sector ratings at Scope Ratings GmbH. Keith Mullin, Senior Editor at Scope Ratings, contributed to writing this commentary.

Scope Ratings Publishes Its First Sovereign Credit Rating in Africa

Scope Ratings, the European credit rating agency, has published its first sovereign credit rating of Africa, with a credit assessment of the Republic of South Africa (rated BB+ with Stable Outlook).

The rating of South Africa marks Scope’s first public sovereign rating in one of the world’s fastest-growing regions, a continent where domestic financial systems are developing and innovating rapidly. Scope believes its approach to sovereign and sub-sovereign ratings is well adapted to reflect the continent’s unique qualities.

Long-run Perspective

First, we have incorporated a long-run perspective into our sovereign credit rating model based on five-year forecasting. This allows the group to look past short-term market or cyclical crises, as long as instability does not structurally impair sovereign creditworthiness.

Furthermore, Scope’s methodology sets great store by factors such as the potential demographic dividend and rich ecological and biodiversity resources common to many African countries. African countries’ long-run environmental and economic sustainability will present ratings opportunities.

Scope offers an alternative view in assessing the longer-run ratings implications of comprehensive debt relief for highly-indebted countries, with an enhanced debt-restructuring model and emphasis on transparency, ensuring there are no ‘black boxes’ in the rating process.

Today more than ever, African sovereigns – rated and unrated – need stable and strengthened access to finance to fund sustainable recovery. We believe a rating assignment from a European credit rating agency presents an alternative credit assessment.

South Africa Rating Reflects a Long-term View

In its first-time rating of South Africa, Scope emphasised a long-term view of the credit. Its assessment considers the size and diversification of the South African economy, favourable public-debt profile, strong monetary-policy framework and advanced financial system. These are credit strengths anchoring a rating one level below investment grade.

Figure 1. Real GDP growth (%)

Source: IMF World Economic Outlook, Scope Ratings forecasts

South Africa has approximately USD 250bn of debt outstanding and is Africa’s most established sovereign borrower. Scope Ratings expects South African economic growth to slow to 1.8% this year and 1.1% in 2023 (Figure 1). Favourable tax collections and a government commitment to budgetary consolidation support reduction of the fiscal deficit for FY2022/23 to 4.75% of GDP, but longer-run fiscal challenges remain significant.

For a look at all of today’s economic events, check out our economic calendar.

Giacomo Barisone is Managing Director of Sovereign and Public Sector ratings at Scope Ratings GmbH. Dennis Shen, Director at Scope Ratings, contributed to writing this commentary.

South Africa Mulls Digital Rand, Expects Crypto Regulation in 2023

Key Insights:

  • South African Reserve Bank deputy governor says digital rand is a few years away.
  • The South African CBDC could cut the high cost of cross-border payments for banks.
  • The central bank readies for crypto regulations in 2023.

Cryptocurrency is gaining traction in South Africa after the government made it clear that it is taking cryptos very seriously. The South African Treasury announced further crypto regulations in the Budget Review 2022.

Last month, the South African Reserve Bank (SARB) concluded technical proof-of-concept for a wholesale central bank digital currency (CBDC) settlement system. Dubbed Project Khokha 2 (PK2), this marks the second phase of CBDC launched in 2018.

Additionally, SA is also a part of Project Dunbar, a CBDC initiative for international settlements, along with the central banks of Australia, Malaysia, and Singapore.

Digital rand is a few years away

In March, the central bank said that a digital rand is being explored as a way to improve international banking. The SARB deputy governor Kuben Naidoo has now given a possible timeline for a roll-out.

In his interview with Reuters Wednesday, Naidoo said that a digital rand or a CBDC would turn up in a few years. He noted that the digital rand would work to reduce the high cost of cross-border payments for banks.

It remains a nightmare for South Africans who initiate money remittance from SA to other countries. This is because, according to a World Bank report in 2021, South Africa remains the costliest G20 country to send remittances from. Naidoo said,

“We’re still learning, we’re still experimenting [CBDCs].”

However, he did not mention how long it would take for the central bank to fully implement a digital rand.

Crypto regulations coming to South Africa

The deputy governor further said that regulation of crypto assets is soon coming into force. He suggested that the government regulation of cryptos such as bitcoin (BTC), and ether (ETH), might come to light in the next nine to fifteen months or in 2023.

The South African Reserve Bank is concerned about the possibility of criminal activities associated with cryptos. The bank believes that a proper crypto regulation would prevent theft, money laundering, and undermining of monetary policy. Naidoo noted,

“If crypto assets were to become a very ubiquitous currency, you could undermine the authority of the central bank.”

Additionally, South Africa’s Financial Sector Conduct Authority (FSCA) said in December 2021 that it is preparing a regulatory framework for cryptos to protect vulnerable members of its society.

The regulator said that it is exploring ways to establish rules on how the trading of crypto assets should be conducted. The watchdog said that it would unveil the regulations this year.

The role of cryptocurrencies is rapidly increasing in the African continent. Notably, Chainalysis ranks Kenya, South Africa, and Nigeria among the top-10 countries for cryptocurrency use.

Last October, Nigeria debuted Africa’s first central bank digital currency, dubbed eNaira. The digital naira promised to make financial transactions “easier and seamless” for the entire population.

Commodity Currencies Explained (Part I)

Let’s start by defining what could be called a commodity currency (or commodity pair).

Generally, a commodity currency represents a currency from a country or geographical zone that produces specific commodities which will account for most of its exports.

Some examples of currencies which could be considered as commodity currencies are presented in the following table:

Currencies Top Material Exports
Argentine peso (ARS) Soybean meal ($8.81B), corn ($6.19B), delivery trucks ($3.83B), soybeans ($3.47B), soybean oil ($3.38B), bran ($292M), other vegetable residues and waste ($232M), and ground nut oil ($131M)
Australian dollar (AUD) Iron ore ($67.5B), coal briquettes ($51.5B), petroleum gas ($34.1B), gold ($25.4B), aluminium oxide ($5.6B), sheep and goat meat ($3.07B), and wool ($2.26B)
Brazilian real (BRL) Soybeans ($26.1B), crude petroleum ($24.3B), iron ore ($23B), corn ($7.39B), sulfate chemical wood pulp ($7.35B), poultry meat ($6.55B), frozen bovine meat ($5.67B) and raw sugar ($5.33B)
Canadian dollar (CAD) Crude petroleum ($67.8B), cars ($40.9B), gold ($14.6B), refined Petroleum ($12.3B), vehicle parts ($10.8B), sawn wood ($6.35B), raw aluminium ($5.45B), potassic fertilizers ($5.27B), rapeseed ($3.23B), and rapeseed oil ($2.6B)
Indian rupee (INR) Refined petroleum ($39.2B), diamonds ($22.5B), packaged medicaments ($15.8B), jewellery ($14.1B), cars ($7.15B), Rice ($6.9B), Crustaceans ($4.67B), and Non-Retail Pure Cotton Yarn ($2.86B)
Indonesian rupiah (IDR) Coal briquettes ($20.3B), palm oil ($15.3B), petroleum gas ($8.32B), cars ($4.52B), gold ($4.01B), lignite ($2.91B), stearic acid ($2.76B), uncoated paper ($2.37B), and coconut oil ($1.9B)
Malaysian ringgit (MYR) Integrated circuits ($63B), refined petroleum ($17.8B), petroleum gas ($11.5B), semiconductor devices ($9.65B), palm oil ($8.91B), rubber apparel ($4.37B), other vegetable oils ($1B), copper powder ($873M), asphalt mixtures ($417M), and platinum clad metals ($127M)
Mexican peso (MXN) Cars ($53.1B), computers ($32.4B), vehicle parts ($31.2B), delivery trucks ($26.9B), crude petroleum ($26.6B), tractors ($10.7B), beer ($5.07B), tropical fruits ($3.6B), and railway freight cars ($3.57B)
New Zealand dollar (NZD) Concentrated milk ($5.73B), sheep and goat meat ($2.62B), rough wood ($2.31B), butter ($2.29B), frozen bovine meat ($2.09B), casein ($613M), and honey ($237M)
Nigerian naira (NGN) Crude Petroleum ($46B), petroleum gas ($7.78B), scrap vessels ($2.26B), flexible metal tubing ($2.1B), and cocoa beans ($715M)
Peruvian nuevo sol (PEN) Copper ore ($12.2B), gold ($6.76B), refined petroleum ($2.21B), zinc ore ($1.65B), and refined copper ($1.62B), animal meal and pellets ($1.54B), lead ore ($1.01B), fish oil ($434M), and buckwheat ($139M)
Russian ruble (RUB) Crude petroleum ($123B), refined petroleum ($66.2B), petroleum gas ($26.3B), coal briquettes ($17.6B), wheat ($8.14B), semi-finished iron ($6.99B), coal tar oil ($4.49B), raw nickel ($4.03B), and nitrogenous fertilizers ($3.05B)
South African rand (ZAR) Gold ($16.8B), platinum ($9.62B), cars ($7.61B), iron ore ($6.73B), and coal briquettes ($5.05B), manganese ore ($3.16B), chromium ore ($1.92B), titanium ore ($583M), and niobium, tantalum, vanadium, and zirconium ore ($480M)
Swiss franc (CHF) Gold ($59B), packaged medicaments ($46.2B), blood, antisera, vaccines, toxins, and cultures ($32.9B), base metal watches ($13.6B), jewellery ($10.9B), precious metal watches ($7.32B), and hydrazine or hydroxylamine derivatives ($501M)
US dollar (USD) Refined petroleum ($84.9B), crude petroleum ($61.9B), cars ($56.9B), integrated circuits ($41.4B), vehicle parts ($41.2B), medical instruments ($29.5B), gas turbines ($28.1B), aircraft parts ($16.3B), and orthopedic appliances ($12.1B)
Vietnamese dong (VND) Broadcasting equipment ($42.3B), telephones ($18.2B), integrated circuits ($15.5B), textile footwear ($10.6B), and leather footwear ($6.43B), coconuts, Brazil nuts, and cashews ($3.16B), fuel wood ($2.05B), cement ($1.39B), metal-clad products ($1.37B), and cinnamon ($175M)
West African CFA franc (XOF) Gold ($11.66B), cocoa beans ($3.84B), refined petroleum ($2.64B), rubber ($1.08B), raw cotton ($1.04B), and crude petroleum ($941M), cocoa paste ($795M), other oily seeds ($407M), Phosphoric Acid ($346M), coconuts, Brazil nuts, and cashews ($280M), ground nuts ($192M), zinc ore ($173M), raw zinc ($155M), electricity ($141M), cocoa shells ($115M), calcium phosphates ($95.7M), radioactive chemicals ($59.6M), rough wood ($59.5M), raw copper ($49.4M), Petroleum Gas ($42.5M), non-fillet frozen fish ($356.1M), other vegetable residues ($25.4M), and aluminium ore ($3.17M)

Data: The Observatory of Economic Complexity (OEC)

(Bold: products which the country/economic area was the world’s biggest exporter in 2019)

For active trading purposes, the ones highlighted in yellow would be characterised as freely floating and more liquid currencies. Thus, they would also be more accessible and less costly (with lower fees) to trade.

For hedging purposes, the others would present some advantages to the commercialisation of their associated natural resources, even though they would rather be considered more exotic currencies.


Here is a representation of some key commodity currencies presented in the above table on a weekly timeframe against the US dollar (reference currency):

Graphical user interface, chart, applicationDescription automatically generated

Each chart was represented within 2-standard deviation Bollinger Bands based on a 20-period simple moving average (in orange), a 50-period simple moving average (blue curve), a 200-period simple moving average (the black curve) and in the pane below is a 14-period relative strength index (in blue) to which was applied a 9-period simple moving average (red curve).

All those charts are displayed over a 2-year historical period.

In the next article I’ll focus on highlighting some correlations which may exist between key natural resources and the currencies in which they are usually traded.

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Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Sebastien Bischeri
Oil & Gas Trading Strategist

* * * * *

The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


USD/ZAR Technical Price Action Cues for a Possible Retracement

USD/ZAR Technical Analysis

  • USD/ZAR is in downtrend
  • The price is bouncing off support
  • Selling the rallies is possible if the price stays below M L3/Q L3 PP
  • Breakout lower below M L4 pivot will make a continuation move


  1. Left Shoulder
  2. Head
  3. Right Shoulder
  4. Breakout Entry
  5. Target for a move up/retrace

The price is in a downtrend. Based on the price action, we should see a move down after either a rally or a breakout. Breakout should happen below M L4 14.37812. However, as we can see the dollar is getting stronger vs ZAR so the breakout to the upside might also happen. Target would be Q L3/M L3 of resistance 14.66668-14.70656. Watch for selling the rally if the price gets there. If point 4 on the chart happens, the breakout target would be 13.7572-13.6021.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,


USD/ZAR Bearish SHS Pattern Formation

MH3 is the right shoulder of the bearish formation. We can see the pin bar rejection at the M H3. The shooting star is the signal for a short trade. The zone is clear. 14.700-72 is the zone where we could see a move down. Watch for a bearish momentum up there. If M H3 stays strong we should see a drop towards 14.460 and 14.210.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,



South African Rand Starts Week Stronger Following U.S. Jobs Report

At mid afternoon, the rand traded at 14.2350 against the dollar, around 0.7% firmer than its previous close.

The rand rallied on Friday after the U.S. jobs report came in below market expectations, as the Fed has made a labour market recovery a condition for paring back its pandemic-era asset purchases.

Along with other risk-sensitive currencies, the rand moves regularly on shifts in the outlook for U.S. monetary policy.

“September is typically a period for global financial markets where risk-off can subside, and while some churn is evident, risk-taking can start to pick up, and further dovish comments from the Fed would support this,” Investec chief economist Annabel Bishop said.

This week’s economic data releases include South Africa’s second-quarter gross domestic product (GDP) figures on Tuesday, as well as July manufacturing and second-quarter current account numbers on Thursday.

Analysts polled by Reuters predict that GDP expanded 0.7% quarter on quarter, seasonally adjusted but not annualised, in the April-June quarter – down from 1.1% in the prior three-month period.

That reflects expectations for a sluggish economic recovery from the COVID-19 pandemic.

The yield on the government’s benchmark 2030 bond was flat at 8.810%.

In the equities market, stocks declined, led by retail group Steinhoff after a court judge ruled that it has jurisdiction to hear a liquidation bid against the retailer. The proceedings will now continue from later this week.

The news overshadowed positive developments regarding its lawsuit settlement proposal, which was approved by majority creditors and claimants on Monday, moving the group closer to finalising a deal that has been a major headache since the company’s restructuring.

Steinhoff shares closed 21.62% weaker at 2.90 rand.

Overall, the Johannesburg All-Share index fell 0.18% to 66,253 points while the Top-40 index declined 0.12%.

Mining stocks were also in the red, with the mining index down 3.57% on weaker commodity prices.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Alexander Winning and Nqobile Dludla, Editing by Timothy Heritage and Jan Harvey)

Stretched Dollar Remains Firm

Sterling fell to new six-month lows while the euro recorded its lowest level since late March, and the Australian dollar fell to new lows for the year. Led by a 2% fall in the South African rand, with the bulk of the sell-off coming after the central bank kept policy rates unchanged, which is now lower on the year, most emerging market currencies weakened. The Russian rouble was the strongest in that space, though the lion’s share of the gains came before the central bank hiked its key rate by 100 bp to 6.5% ahead of the weekend.

The dollar had seemed to track short-term US interest rates until recently, and its strength has come in the face of softer rates. The implied yield of the December 2022 Eurodollar futures contract finished the week near 42 bp, down 13 bp over the past few weeks. The 10-year yield fell to about 1.125% before recovering to trade closer to 1.30% at the end of last week.

The dollar and interest rates are behaving as one would expect in a risk-off environment. The contagious Delta variant appears to be dampening activity economic activity in Australia, Japan, and parts of Europe. Several US states are recording multi-month highs in cases, and weekly initial jobless claims unexpectedly rose to their highest level in two months (in the week through July 16).

Floods in Germany, Belgium, and China could also impact economic activity and prices. Droughts in North America may boost food prices and boost natural gas prices as an alternative for a decline in hydroelectric output. A freeze in Brazil sent coffee prices sharply higher, while wildfires in Canada saw lumber prices rise dramatically (almost 22% over the past three sessions) after trending lower in recent weeks.

On the other hand, equities are harder to fit into the risk-off narrative. Most of the large Asia Pacific equity market fell, but Europe’s Dow Jones Stoxx 600 rallied and will take a four-day advance into next week. The benchmark is within striking distance of the record high it set earlier this month. The S&P 500 and NASDAQ advanced and have only fallen in two of the past eight weeks. They are both poised to set fresh recorded highs.

Dollar Index

The Dollar Index recorded a key reversal in the middle of last week. After rising to its best level in three months (~93.20), it reversed lower and settled below the previous day’s low. Follow-through selling the next day took it to 92.50 and the 20-day moving average. It recovered by stalled near 93.00 before the weekend. Neither the MACD nor the Slow Stochastic confirmed the new high, but the underlying tone remains constructive and buying on dips seems stronger than the selling pressure into rallies. Moreover, the five and 20-day moving averages cross-over has caught the major moves this year since February, and the five-day average is still above the 20-day.

The year’s high was set in late March near 93.45. A break above there could target the high from early last November near 94.30, and the 94.50 area corresponds to the (38.2%) retracement of the drop since the panic-driven high in March 2020 near 103.00.


The downside momentum of the euro seemed to pause in recent days ahead of $1.1750. However, the bounces have been brief and shallow. The momentum indicators have not confirmed the recent lows. The risk is for a test on the year’s low set in late March near $1.1700, and a break of it could signal a return to the low set near $1.16 on the night of the US election last November.

The ECB’s lower for longer forward guidance could attract funds into the asset markets, but the euro itself is unloved, and speculators in the futures market are still scaling out of a net long position. A move above $1.1830, where the 20-day average is found, would lift the tone. The euro has not closed above the 20-day moving average since early June.

Japanese Yen

The dollar began last week testing JPY109.00, its lowest level since late May as the US 10-year note yield slumped below 1.20%. By the end of the week, the yield was back near 1.30%, and the greenback was around JPY110.60. It settled above its 20-day moving average (~JPY110.40) for the first time in a couple of weeks. The MACD and Slow Stochastic have turned up from oversold territory. Overcoming chart resistance near JPY110.65 could see a push above JPY111.00. The year’s high was set earlier this month near JPY111.65.

British Pound

Sterling fell to five-month lows near $1.3570 on July 20, just shy of the (50%) retracement of the rally from last November, found near $1.3550. In the second half of the week, a recovery attempt stalled near $1.3785 in front of the 20-day moving average (~$1.38). This area presents an important technical hurdle, which overcoming would lift the tone. The momentum indicators look constructive as they try to turn higher. A move below $1.3680 warns of a return to the lows.

Canadian Dollar

The greenback reached 5.5-month highs against the Canadian dollar at the start of last week, near CAD1.28. It pulled back to the CAD1.2525 area before buyers re-emerged, and it consolidated mostly below CAD1.26. The MACD has turned down, as has the Slow Stochastic, without confirming the high. Still, a push back above the CAD1.2650 area could warn of another run at the highs. The 20-day moving average is near CAD1.25, and the US dollar has not closed below it since early June. Doing so now would likely confirm that a top is in place.

Australian Dollar

The elevated covid cases in Sydney and the weakest composite PMI (preliminary reading) since May 2020 (45.2) illustrate headwinds for the Australian economy. The minutes from last month’s RBA meeting showed that officials have a flexible stance toward bond purchases. It is likely to use that flexibility at its August 3 meeting to boost its bond purchases. Ahead of that, investors expect a jump in Australia’s Q2 CPI, with the headline rising above 3.5% year-over-year from 1.1% in Q1.

The underlying measures will likely firm toward 1.5%-1.6% from 1.1%-1.13%. The Aussie posted a key reversal in the middle of the week by falling to new lows for the year (~$0.7290) and then recovered to finish above the previous day’s high. Sellers were lurking in front of $0.7400 and drove it back to $0.7350 ahead of the weekend. The pre-weekend price action was poor, and the close was near session lows. The next important support area is near $0.7300.

Mexican Peso

Although the dollar set four-day lows ahead of the weekend, it still managed to close high (0.5%) on the week for the third consecutive week. The JP Morgan Emerging Market Currency Index fell for the fourth consecutive week and the sixth weekly fall in the past seven weeks. The greenback peaked against the peso in the middle of the week, slightly above the 200-moving average (~MXN20.21). Initial support now is seen near MXN19.95 and a stronger shelf in the MXN19.80-MXN19.83 area.

The Slow Stochastic is trending higher and is approaching overbought territory. The MACD has flatlined near the trough. In the slightly bigger picture, the dollar has mostly been confined to a range set on June 24 (~MXN19.7150-MXN20.2150).

Chinese Yuan

The US dollar posted a minor gain of about 0.15% against the yuan ahead of the weekend to secure another weekly advance. The advance covers the last eight weeks without fail. While that is statistically true and no doubt has not been lost on official and private observers, it is also true that the greenback has been mostly in a CNY6.45-CNY6.50 range. Rather than see a depreciation of the yuan, it has gone essentially nowhere.

The dollar has not traded above the high set in late June near CNY6.4910 this month, though it was approached a couple of times. It is also true that the yuan’s 0.7% gain against the dollar this year make it one of the strongest emerging market currency so far this year and stronger than all the major currencies but the Canadian dollar (~1%). Moreover, by focusing on the eight-week decline of the yuan against the dollar, one misses the fact that the yuan is at five-year highs on a trade-weighted basis (CFETS).

This article was written by Marc Chandler, MarctoMarket.

Dollar Rises as U.S. Data Shows Inflation Running Hot

U.S. consumer prices rose by the most in 13 years in June amid supply constraints and a continued rebound in the costs of travel-related services from pandemic-depressed levels as the economic recovery gathered momentum.

“(This was) clearly an upside surprise. It will make (Federal Reserve Chairman Jerome) Powell’s testimony on Capitol Hill tomorrow a much trickier exercise than it would’ve otherwise been given that it will put some additional pressure on the ‘transitory’ narrative,” said Michael Brown, senior analyst at payments firm Caxton in London.

“FX reaction is as one would expect given an upside surprise, with the dollar rallying across the board in line with the sharp rise in Treasury yields,” said Brown.

Traders are looking forward to Powell testifying before Congress on Wednesday and Thursday for any signals on the timing of potential U.S. tapering.

Powell has repeatedly stated that higher inflation will be transitory, noting that he expected supply chains to normalize and adapt. Treasury Secretary Janet Yellen shares that view.

The dollar index, which measures the greenback against a basket of six currencies, was 0.59% higher at 92.762, its highest since July 8. The index is just shy of the three-month high of 92.844 touched last week.

The possibility of U.S. stimulus withdrawal – brought to the fore by a surprise shift in tone last month from the Fed – has boosted the dollar in recent weeks despite a renewed rise in coronavirus cases in many parts of the world.

U.S. consumer price inflation data is likely to help boost the dollar higher.

“It kind of reinforced the Fed taper story and the dollar has been consolidating for the front of the week, and I think this was the kick that it needed to renew its gains,” said Kathy Lien, managing director at BK Asset Management in New York.

Modest strength in the price of oil, a major export for Canada, failed to stanch the Canadian currency’s losses against its U.S. counterpart. The loonie was down 0.5% to a four-day low against the dollar. The Canadian central bank is due to update its economic forecasts at a policy announcement on Wednesday.

Sterling fell on Tuesday after the Bank of England scrapped pandemic-era curbs on dividend payments by banks, but warned some asset prices look stretched.

The pound was last down 0.49% against the dollar, with the bulk of the day’s losses coming after the release of the U.S. CPI data.

Escalating violence over the jailing of former President Jacob Zuma  sent South Africa’s rand down more than 2% to a three-month low against the U.S. dollar.

China’s yuan rose to a near one-week high after surprisingly strong trade data  eased fears about a slowdown in what has been one of the world’s strongest economic recoveries.

Cryptocurrencies remained on the back foot on Tuesday, with bitcoin down about 2.18% at a four-day low of $32,384.64, as investors shed riskier assets following U.S. inflation data.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saqib Iqbal AhmedEditing by Sonya Hepisntall)

Africa’s Most Traded Currencies in 2020


The currency of a country tells you a substantial amount about its economy as well as living standards of the people.

As diverse as the African continent and her countries are, so are the currencies which see high daily volumes of trade.

Tunisian Dinar (TND)

The Tunisian Dinar trades at around 2.70 TND for 1 USD. Tunisia was colonized by the French and the use of the French Franc as the main currency continued for years, until 1960, when the country replaced the franc with dinar after obtaining independence.

The monetary policy of the country allows for the export and import of dinars, or the convergence thereof to other currencies, allowing the dinar to be one of the highest traded currencies.

Botswana Pula (BWP)

The Botswana Pula trades at around 11.04 BWP for 1 USD. The Botswana Pula is an attractive currency as traders tend to favour it when trading on the Johannesburg Stock Exchange, the largest stock exchange in Africa.

US Dollar (USD)

The US Dollar is the most dominant currency which is traded more often than any other currency in the world, forming part of 88% of all trades.

Nigerian Naira (NGN)

The Nigerian Naira trades at around 396.67 NGN for 1 USD. The Central Bank of Nigeria is solely permitted to issue the Nigerian Naria, and it controls the volume of money which is supplied in the economy to ensure that there is monetary and price stability.

Seychellois Rupee (SCR)

The Seychellois Rupee trades at around 20.91 SCR for 1 USD. The Seychellois Rupee, the official currency of Seychelles, falls among the most traded currencies in Africa. It is divided into 100 cents and referred to as ‘Roupi’ in the local Creole language.

Egyptian Pound (EGP)

The Egyptian Pound trades at around 15.66 EGP for 1 USD. Egypt is a famous Arab nation which has been in existence since the biblical times. Egypt is famous for its pyramids and the Egyptian pound, as the local currency, is one of the most valuable in Africa.

Zambian Kwacha (ZMW)

The Zambian Kwacha trades at around 21.38 ZMW for 1 USD. As one of the most valuable and most traded currencies in Africa, the Zambian Kwacha is the local currency of Zambia, a landlocked country in South Africa.

South African Rand (ZAR)

The South African Rand trades at aroxund 15.34 ZAR for 1 USD. South Africa is one of the most developed democratic states in Africa and comes in eighth in the strongest currencies in Africa. South Africa is a vibrant and competitive economy and the only African member of the G20 economic group.

You might like: South Africa is officially one of the fastest growing forex trading industries in the world.

Kenyan Shilling (KES)

The Kenyan Shilling trades at around 110 KES for 1 USD. Next to the US Dollar, the South African Rand, Nigerian Naira, and others, the Kenyan Shilling is one of the most traded currencies in Africa.

Dollar Bounces, Gold Slips, while Equities Hold Their Own

In the emerging market space, the liquid and accessible currencies, like the Turkish lira, Mexican peso, and Russian rouble, are down the most. The lira has fallen 1% after intrasession volatility that pushed it to a record low against the euro yesterday. That seems to be the source of the pressure on the lira against the dollar.

The South African rand is among the weakest among emerging market currencies today even though the IMF approved a $4.3 bln loan, the most granted so far to assist in combatting the virus. Despite the correction in the foreign exchange market, equities are mostly firm. In the Asia Pacific region, only a few markets could not sustain gains.

Japan, Taiwan, and Australia were among them. South Korea led the region with a nearly 1.8% gain. Europe’s Dow Jones Stoxx 600 is up almost 0.5% after falling for the past two sessions (~2%). US shares are little changed. US bond yields backed up yesterday, with the 10-year yields popping back above 60 bp. This exerted upward pressures in Asia and Europe. Gold reached $1981 before the profit-taking pushed it to about $1907 from where it is recovering. September WTI is little changed around $41.50 a barrel.

Asia Pacific

China is resorting to local lockdowns to combat the new outbreak in the virus. The 61 cases reported Monday were the most in four months. Separately, New Zealand became the latest country to suspend the extradition treaty with Hong Kong. That means that of the intelligence-sharing Five Eyes, only the US has not done so, though it has threatened to do so.

India has banned almost 50 Chinese apps to largely check the workaround the 59 apps banned last month. Another 250 apps are under review. India has cited threats to user privacy and national security. This is a new front in the confrontation with China. The US and Japan are considering their own bans on some Chinese apps.

The dollar is in a quarter of a yen range on either side of JPY105.45, as it is confined to yesterday’s range. The upside correction does not appear over, and the greenback could test previous support and now resistance near JPY106, where an option for $600 mln expires today (and a $1.8 bln option expires Thursday).

The Australian dollar is little changed as it moves within the $0.7065-$0.7180 range that has confined it for around a week now. It has held above $0.7115 today, but it may be retested. The PBOC set the dollar’s reference rate at CNY6.9895 today, nearly spot on where the models suggested. After falling to a four-day low near CNY6.9870, the dollar recovered back above CNY7.0. China seems intent on not allowing the US to get an advantage by devaluing the dollar, something that President Trump has advocated. A stable dollar-yuan rate in a weak dollar environment means that the yuan falls against the CFETS basket. Against the basket, the yuan is at its lowest level in a little more than a month.


News from Europe is light and the week’s highlights which include the first look at Q2 GDP (median forecast in the Bloomberg survey is for a 12% quarterly contraction), June unemployment (~7.7% vs. 7.4%), and the first look at July CPI (median forecast is for a 0.5% decline for a 0.2% increase year-over-year) still lie ahead.

Today’s focus is mostly on earnings and bank earnings in particular. European banks are being encouraged to extend the hold off of dividend payout and share buybacks that were first introduced in March. This may be worth around 30 bln euros. The UK is fully aboard too. In terms of loan-loss provisioning, European banks are expected to set aside around the same amount as they did in Q1, which was about 25 bln euros. In comparison, the five largest US banks have added a little more than $60 bln in the first half to cushion sour loans.

Fitch lowered its five-year growth potential for the UK from 1.6% to 0.9%. It also took EMU’s potential to 0.7% from 1.2%. This could weaken the resolve of asset managers, where industry surveys suggest a desire to be overweight European stocks and the euro on ideas of economic and/or earnings outperformance. That said, the number of analyst upgrades has surpassed the number of downgrades in Europe for the first time this year.

The euro reached $1.1780 yesterday. As the momentum stalled in Asia, some light profit-taking has been seen that saw it briefly dip just below $1.17 in early European turnover. Intraday resistance is seen near $1.1740-$1.1750. In the recent move, the session high has often been recorded in North America, and we’ll watch to see if the pattern holds today. The market may turn cautious ahead of tomorrow’s outcome of the FOMC meeting.

Sterling poked above $1.29 yesterday for the first time in four months. It made a marginal new high today (~$1.2905), but it too is consolidating. Support is seen in the $1.2830-$1.2850 area. As the euro was trending higher against the dollar yesterday, it also rose to about CHF1.0840, its highest level here in July. However, today’s consolidation has seen the euro slip back to around CHF1.0775. Look for it to find support above CHF1.0760.


The US reports house prices, Conference Board consumer confidence, and the Richmond Fed’s July manufacturing survey. Even in the best of times, these are not the typical market movers. The focus instead is three-fold: corporate earnings (today’s highlights include McDonald’s, Pfizer, and 3M), the negotiation over the fiscal bill, and the start of the FOMC meeting. Canada has not economic reports, while Mexico’s weekly reserve figures are due. It continues to gradually accumulate reserves. They have risen by about 4.5% this year after a 3.5% increase last year.

The Economic Policy Institute estimates that a cut in the $600 a week extra unemployment insurance to $200 a week will reduce aggregate demand and cut the number of jobs that were projected to be created. It expects a loss of about 2.5% growth and 3.4 mln fewer jobs. After this week’s FOMC meeting and the first look at Q2 GDP, the US July employment report is due at the end of next week.

It is one of the most difficult high-frequency economic reports to forecast. Still, the outlook darkened after last week’s increase in weekly initial jobless claims, which covered the week that the non-farm payrolls survey is conducted. Another increase, which is what the median forecast in the Bloomberg survey expects, is only momentarily going to get lost in the excitement around the GDP report.

The relatively light news day allows us to look a little closer at Mexico’s June trade data that was out yesterday. Mexico reported a record trade surplus of $5.5 bln. Yet, it is not good news. Mexico is hemorrhaging. The IGAE May economic activity index, reported at the end of last week, showed a larger than expected 22.73% year-over-year drop. The 2.62% decline in the month was nearly three times larger than economists forecast. With the virus still not under control, the government’s forecast for a 9.6% contraction this year is likely to be overshot. The record trade surplus was a function of a larger decline in imports (-23.2%) than exports (-12.8%).

Auto exports are off more than a third (34.6%) this year, to $47.5 bln. Other manufactured exports are down 3.4% to $113.8 bln. Petroleum exports have fallen by nearly 42% in H1 to $8.0 bln. Agriculture exports edged up by 7.3% to $10.5 bln to surpass oil. The peso’s strength reflects not the macroeconomy but its high real and nominal interest rates in the current environment. Yesterday, the dollar fell below MXN22.00 for the first time this month. The June low was near MXN21.46.

The US dollar initially extended its losses against the Canadian dollar, slipping to CAD1.3330, just ahead of last month’s low (~CAD1.3315) before rebounding to almost CAD1.3400. The upside correction could run a bit further, but resistance in the CAD1.3420-CAD1.3440 area may offer a sufficient cap today. The greenback found support against the Mexican peso near MXN21.90 and bounced back to around MXN22.07. Resistance is seen near MXN22.20. The peso is up about 4.5% this month, but within the region has been bettered by Chile (~+6.75%) and Brazil (~+6.15%). The Colombian peso’s almost 2..2% gain puts it in the top 10 best performing emerging market currencies so far this month.

For a look at all of today’s economic events, check out our economic calendar.

Positioning the Secret Sauce for Further Gains in Risk

S&P500 and NAS futures opened a little lower, but have come roaring back with Asian equities firing up nicely, despite selling in crude futures.


Certainly, the MXN has worked well of late, and it feels like in the absence of a pullback in stocks and a further reduction in implied vol that USDMXN heads for 23. EURMXN could push through the 50-day MA (25.64) amid the favourable environment for carry positions, although, much still depends on price action in crude which, as I say is giving back some of last week’s 25.1% rally. I also went short EURAUD as a trade and feel the downside has opened up nicely here – here is my trade rationale.

AUDUSD continues to have lock-on on the S&P500 futures, with the US equity benchmark putting on 3.5% last week, dwarfed only by a 6% and 5.5% rally in the NASDAQ and Russell 2000, respectively.

AUDUSD daily – pushing the 100-day MA
AUDUSD daily – pushing the 100-day MA


On the daily, the S&P500 will be eyeing a break of the 29 April high of 2954 and from we make an assault at 3000, which is obviously the round number, but the 100- and 200-day MA also sit here too. We are also told this is the line, where the CTAs (trend-following funds) flip to increase long positions in S&P500 futures, a development that could take us materially higher.

Looking at 5-day realised volatility in the S&P500, we see it has come down to 16.4%, from a high of 176% (17 March) and we’re back to pre-crisis levels and one suspects if vol sellers push the VIX closer to 20% (currently 27.98%), vol-targeting funds then enter the fray too.

White – S&P500 5-day realised volatility/RV, orange – 30-day RV

Source: Bloomberg

This, again, would be positive for risk FX such as the NOK, AUD, NZD, MXN and ZAR.

I have been guilty of not wanting to chase this rally in equity indices, but the lack of any follow-through in the selling (pick up in vol) has certainly lowered the impulse to short risk. I do see us moving past peek stimulus inspiration, with the Fed’s balance sheet growing at an ever-slower pace, as they do for other central banks, although the commitment to do more should we see a second wave in the corona virus is key.

On the fiscal side, the US House is due to vote on a Phase 4 bill on Thursday, rumoured to be close to $750b, and it’s uncertain that will pass, with Trump making it clear he wants to tie this in with a payrolls tax cut.

It is also clear that this is not a time for thinking too intently about valuation, with the S&P500 commanding an incredible 23.06x 2020 earnings, while 2021 FY earnings sit at 18x – economics have not played into considerations either. These are markets boosted by actions from the Fed to support credit and liquidity more broadly.

Re-positioning from hedge funds, specifically the systematic and rules-based crowd has been key and will be the reason, if it happens for new highs in US equity markets.

Consider that cash in money market funds, the safest of safe, has grown 30% since March, so there is still a ton of cash on the sidelines.

We can also look at the futures position in S&P500 futures held by non-commercial players and see this held net by short 222k contracts – that’s the largest net short positions held since 2015 and over two standard deviations of the 10-year average.

Total US$ value in money market funds

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Source: Bloomberg 

The disconnect between economic reality and valuation is keeping a lot of discretionary players from entering the market here, and that is fair as it feels incredibly wrong to buy risk – I guess that is one of the many reasons why a systematic approach can work in one’s favour.

So, we watch the S&P500 and NAS futures through Asia, where both markets were down smalls early doors and are coming back to the flat line as I type. There is little to trouble on the data side, although tomorrows (22:30aest) US CPI could be interesting with headline expected to drop 0.8% MoM and core -0.2%, amid a fierce debate on whether we get inflation or deflation as a result of COVID-19.

Retail sales (Friday 22:30aest) would typically get a strong look-in, and calls for an 11.7% decline won’t go unnoticed, but just as we saw with the 20m jobs lost in Fridays NFP and the failure to move markets; economic data at the moment is largely irrelevant, at least for markets – who will be looking intently on re-openings in the US and Europe, with plans to do so in the UK, Australia and others.

What could be important is the raft of Fed speakers this week, which you can see on the calendar below. Fed chair Powell mid-week speech will be the highlight, especially, with all the talk of negative rates that were priced into the rates market most intently on Thursday. In a crisis, you leave everything on the table, and things move so fast that what the central bankers say one day may not count the next. So, while Powell sits in the camp that negative rates are not warranted – he has been consistent on this message – it makes some sense for Powell to be vague enough to keep negative rates as a future option.

He can remove pricing from the fed funds future by lifting interest earned on excess reserve (IOER) by 5bp. However, with yields on 2- and 5-year Treasuries at record lows, in turn supporting sentiment more broadly, and reducing the appeal of the USD, it has pushed traders out the risk curve. Therefore, it makes sense for Powell to be somewhat vague on the subject.

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As the week rolls on front-end yields (2 and 5-year USTs) could matter for the USD this week and presumably for gold too, which maintains the 1738 to 1675 range. USDCNH continues to be a central focal point and barometer of sentiment towards the US-China relationship, while inflation expectations and implied vol continues to be central too.

Good luck to anyone trading the Bitcoin Halving today, with price trading lower into the event. It seems we are seeing a buy the rumour, sell the fact scenario play out before the fact it seems.

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Chris Weston, Head of Global Research at Pepperstone.

(Read Our Pepperstone Review)

Forex Regulation Across Africa – The Complete Guide

Partly, this intense growth was caused by the fact that ESMA enforced new restriction laws on the maximum leverage that EU traders can use (this caused FX brokers to focus on other big markets, like Africa)

An average of over $5.1 trillion is traded daily in the Forex market. Though worldwide, there are major forex trading centres which include London, Tokyo, Paris, Sydney, New York, Zurich, Singapore, and Hong Kong. A Forex trading day starts in Australia and ends in New York. The market stays open for 24 hours a day and five and a half days a week.

There are specific regulations in countries, continents that oversee the trading of Forex. In some countries, FX trading is restricted and banned while in others, it is fully supported. In this post, our focus is on Africa as we’ll be looking at Forex regulation across the continent.

Overview of Forex Trading In Africa

Forex trading is a very competitive activity, and in Africa, it is no different. The market has experienced speedy growth over the last two decades as more Africans are being enlightened on what Forex entails.

Significantly, the last decade has seen the Forex market go from almost unnoticed to becoming one of the most dynamic industries in the content. This can be attributed to the advent of mobile devices and other technologies.

There are about 1.3 million Forex traders in Africa. South Africa and Nigeria lead the way as both countries constitute a large percentage of the total figure.

Other countries where Forex trading is gaining ground are Kenya, Egypt, Angola, Namibia, and Tanzania. This has attracted international Forex brokers like IQ Option, IC Markets, XM Forex Trading, ForexTime (FXTM), and Olymp Trade.

With this vast amount of forex traders, it is expected that government financial regulatory bodies will be interested in monitoring trading activities in individual countries.

Forex-Friendly African Countries

A lot of African countries are Forex-friendly, but there are minor restrictions from the government. Forex can be traded in Nigeria, South Africa, Egypt, Kenya, Namibia, Ivory Coast, and many other African countries.

Whereas Forex trading cannot be said to be legalized in these countries, it also does not break the law. Before a Forex broker can offer Forex trading services to a country’s citizen, it is mostly mandatory to acquire a trading license.

Forex-Prohibited African Countries

Currently, a complete Forex ban is not placed on any country in Africa, unlike world countries like North Korea and Israel. As stated earlier, there are minor restrictions from the government in some countries. These restrictions do not prohibit the trade of Forex but are imposed to prevent fraudulent and scam activities.

Some of these restrictions are on the maximum trading amount and the maximum amount you can have in your Forex account. These are similar to Forex restrictions imposed in countries like China and Russia. Furthermore, Forex trading with non-licensed Forex brokers is prohibited in some African countries. Likewise, you can only trade Forex for yourself and not for anyone else (identification is mandatory for most Forex brokers).

Forex trading is usually not welcomed in countries governed with strict sharia laws. As a result, countries like Algeria, Benin, Burkina Faso, Egypt, etc., may not be the best to engage in Forex trading.

Let’s consider how Forex trading is regulated in some major African countries:

Forex Regulation In South Africa

In South Africa, various regulatory trading rules are put in place to minimize Forex trading risks. These regulations are imposed by the South African Financial Sector Conduct Authority (FSCA), formerly known as the Financial Services Board (FSB). The FSCA is the body responsible for monitoring and controlling all financial activities in the country. It is the most vigorous Forex market regulation in Africa.

The FSCA regulatory policies are in line with what is obtainable from regulatory bodies overseas. Notably, all OTC derivative brokers must report all trades in a bid to organize CFDs. Through the FSCA, Forex brokers can relate with each other without resulting in conflict.

According to, the FSCA license incorporates some immense benefits like that FX brokers regulated by the FSCA treat their customer in good faith and that they help them with financial education and financial literacy. Not to mention that if anything goes south, a South African trader who is trading with FSCA regulated broker can go to FSCA if they think they have been scammed by their broker or mistreated.

Forex Regulation In Kenya

In Kenya, the Capital Markets Authority (CMA) regulates all financial activities, including foreign exchange trading. Before a Forex broker can do business in Kenya, they must be registered and licensed by the CMA.

Forex was previously unregulated in Kenya. Before 2016, lots of Kenyans were trading with unregulated brokers, and there were too many reports of fraudulent activities. As a result, the Kenyan government authorized the CMA to regulate Forex trading activities in the Finance Act 2016. The principal aim of the regulation is to make the market transparent and protect investors’ funds.

The CMA drew regulatory leads from international regulatory bodies like the Australian Securities and Investment Commission (ASIC) and the United Kingdom’s Financial Conduct Authority (FCA).

Forex Regulation In Nigeria

Forex trading in Nigeria is still unregulated despite the market being one of the most active ones in the continent. However, it is perceived that the country’s apex bank is working with the Securities Exchange Commission to commence Forex trade regulation.

Despite the absence of regulation in the country, the government does not consider Forex trading illegal. There are local Forex brokers who register just like other businesses and carry out foreign exchange activities as usual. Most Forex traders in Nigeria make use of foreign Forex brokers rather than the local ones due to this lack of regulation. The trading risk is totally on the trader, so they assume the foreign brokers are more trustworthy.

Banking policies do have effects on Forex trading in Nigeria. Some Nigerian banks may prevent customers from using their electronic cards to make payments or withdraw from foreign exchange platforms. Presently, there are imposed restrictions on the amount of foreign currency a Nigerian can spend outside the country. These are individual policies that could be eliminated if the Nigerian government properly legalizes Forex trading.

How To Select The Best Forex Broker For Africa

Due to the risks involved in Forex trading, it is vital to be cautious when deciding on the best Forex broker to invest in Africa.

Firstly, you should check for the broker license. If Forex trading is regulated in your country, check to see the Forex brokers licensed by the regulatory body. For a country like Nigeria, where the market is not restricted, consider foreign brokers who are licensed by global licensing authorities.

The next thing to do is to check out the trading platforms offered by these brokers. Check for their deposit bonuses, ratings, minimum deposit, and payment options before making a decision. For a practical trading experience, a Forex demo account should be featured where you can try your hands before going live. Do not invest real money if you haven’t fully understood how the platform works.

How To Stay Safe While Trading Forex

You should avoid any unlicensed Forex broker in Africa. The amount of Forex scams in African countries is on the high side, and it has resulted in grave losses for the victims. By going with a well-licensed broker, this risk is almost eliminated, and you can trade more assuredly.

Additionally, you should be cautious when making a substantial investment when you don’t fully understand the Forex market. Likewise, you should control your emotions and don’t spend all your money on Forex trading.

Conclusion – The Future Of Forex In Africa

Interest in Forex will undoubtedly continue to rise in the coming years. The sensitization level is currently high as Forex trading is advertised on newspapers, TVs, radios, websites, etc.

There are equally Forex seminars and programs to create awareness. More overseas Forex brokers are also picking interest in offering their services to African countries. Consequently, better regulatory policies will be imposed in countries that lack them so that aspiring traders can trade safely.

EUR/USD Price Forecast – Euro Continues to Chop Back and Forth With Positive Thursday

The Euro has rallied during the trading session on Thursday after the Federal Reserve has suggested that the central bank was going to come out and buy just about anything it could, including junk bonds. That being the case, the market is likely to continue punishing the US dollar, but at the same time the European Union is an absolute mess financially. Because of this, the market is likely to continue to see Euro weakness in general. The 1.10 level above is massive resistance, so I don’t think that the pair get above there. When we get closer to the 1.10 level I going to be selling on signs of weakness.

EUR/USD Video 10.04.20

To the downside, I see the 1.08 level as support, and the 1.06 level as the same. This pair will continue to chop around, thereby been very difficult to trade unless you can trade small or perhaps trade short-term charts. I favor the downside in this pair, despite the fact that the Federal Reserve is flooding the market with dollars. This will probably cause a short-term pop to the upside, but I suspect it will also be short-lived.

You can use this as a proxy for the US Dollar Index if your broker doesn’t offer it, because it is a major component to that indicator. Simply put, I use this chart as a gauge of US dollar strength or weakness in other trades, especially when it comes to emerging market currencies. For example, you can do something like use this chart to discern whether the US dollar is showing strength or weakness, and translate that against the Hungarian forint, Mexican peso, South African Rand, and so on.

The Dollar is Searching for its Price Ceiling

The dollar index tracks the USD against the six most popular world currencies, where the yen and the euro can be considered the main catalysts for a decline, having lost 3.0% and 2.6%, respectively.

Nevertheless, smaller and secondary currency pairs also deserve traders’ attention, the movement in which is a kind of manifestation of profound processes of financial markets. Judging by these movements, the longstanding carry-trade idea becoming obsolete, as the high-yielding currencies of emerging markets are no longer highly profitable and the central banks of these countries are softening their policies in the attempt to revive economic growth.

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Against the backdrop of the coronavirus epidemic and the Chinese authorities’ efforts to stimulate the economy, the Yuan is weakening. The Dollar is again worth more than 7 Yuan due to the easing of monetary policy of the authorities and fears of investors about a sharp cooling of China’s economic growth. The 7.0 mark was and remained an essential barometer of sentiment in China.

The price dynamic above this level reflects the continued uncertainty in markets about future growth prospects. In early 2017 and late 2018, the Yuan was heavily protected by PBC near this level. The signing of Phase One trade agreement also returned the renminbi underneath this waterline. However, the demand for the Dollar pushed the pair higher earlier this week.

The weakness of the Yuan and the Chinese economy also affected the Australian Dollar. AUDUSD is declining again this week, updating its 2009 lows below 0.67.  It was a kind of waterline at 0.70, and the pair failed its attempt to climb higher at the end of last year.

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A separate story is a Turkish Lira. This currency does not depend on problems in China so that it can be viewed as a different story. The USDTRY broke through 6.0 this week, following another cut of the rate by the Turkish Central Bank. TCMB has been more focused on reviving economic growth in recent months, rather than curbing inflation.

The steady downward trend of the lira against the Dollar has been observed for more than a month, and last week the pair crossed the 6.0 level, returning to last year’s highs. Above the current mark (6.08) the pair was only in May 2019 and from August to October 2018 during the period of extreme volatility in the pair. It seems that now the markets are trying to find the “ceiling” for the pair, the growth above which will be sensitive for the policymakers, forcing them to stand up for their currency.

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The same can be said about the South African Rand, which crossed the mark of 15.00 in USDZAR, which was repeatedly tested for strength in recent years but did not stay long. The weakening of the Rand against the Dollar looks more surprising as it is happening against the background of robust gold price growth, that previously determined the price direction of ZAR.

This article was written by FxPro

Forex Daily Recap – Pound Slipped on Downbeat June ILO Unemployment Data


Cable continued to reveal over-sold conditions on the Relative Strength Index technical indicator that pointed near 28.14 adverse level. Notably, the slight rise in the June UK Unemployment Rate had favored the bears. This June ILO Unemployment data came around 0.1% higher than the previous 3.8%. Meantime, the July Claimant Count Change recorded 4K lower than the market expectations of about 32.0 K. Also, the June 3Mo/Yr Average Earnings Excluding Bonus reported 3.9% over 3.8% forecasts.

GBPUSD 1 Day 13 August 2019
GBPUSD 1 Day 13 August 2019

Nevertheless, the market appeared to pay less attention to other upbeat data releases and focused over the downbeat ILO report. On the technical chart, the GBP/USD pair continued to maintain its volatility within a multi-month old downward moving trend channel. Also, strong SMA conflux stands above the pair and the aforementioned trend channel, warning the bulls.

USD Index

After three adverse closings in a row, the Greenback was underway a positive closing today. On the back of robust US data, the USD Index breached above 97.63 resistance, providing strength to the Greenback bulls. In the middle of the day, the highly crucial July CPI that excluded Food & Energy data reported 2.2% over 2.1% estimates.

US Dollar Index 1 Day 13 August 2019
US Dollar Index 1 Day 13 August 2019

Notably, the YoY July CPI data upshot 0.1% this time over the market hopes of around 0.2%. Anyhow, after gaining some power and breaking above the 97.63 mark, the bulls were moving towards the next resistance target at 97.86 mark. On an overall view, the pair was maintaining a-two-and-a-half-month-old positive trend channel.


The Fiber continued to hover in and around the 1.1200 psychological handle since the last six sessions, including today. Quite noticeably, the July German Harmonized Index of Consumer Prices came in-line with the previously recorded 1.1%. Also, the German August ZEW Survey – Economic Sentiment published -44.1 points over -28.5 points market expectations.

EURUSD 1 Day 13 August 2019
EURUSD 1 Day 13 August 2019

Nonetheless, the ZEW Survey – Economic Sentiment data for the Eurozone also published adverse reports. On the technical chart, the EUR/USD pair had already broken above a major counter trendline, signaling for a robust upward drift. However, overhead SMA cluster and resistances stalled at 1.1251 & 1.1283 levels were confining the upside.


After touching the 7.0707 mark yesterday, the USD/CNY pair was heading downside on Tuesday.

USDCNY 1 Day 13 August 2019
USDCNY 1 Day 13 August 2019

On the economic docket, the July YoY YTD FDI – Foreign Direct Investment data came around 7.3% in comparison to the prior 7.2%. Such a positive Chinese data release activated the pair bears, shedding off the accumulated gains. Also, the strong growing Greenback added more oil to the fire, transferring power to the USD/CNY bears. Meantime, the MACD line hovered above the signal line with green histograms pointing to the north.


The South African Rand currency pair was triumphantly moving above the Ichimoku Clouds, maintaining a robust uptrend. Anyhow, after touching 15.47 psychological mark last day, the USD/ZAR appeared to heath south today.

USDZAR 1 Day 13 August 2019
USDZAR 1 Day 13 August 2019

Needless to mention, the bears seemed to pause near 23.6% Fibonacci retracement level or 15.0892 mark. Despite that, the base line and conversion line stood below the trading pair with face to the north-side. The down-lying Parabolic SAR technical indicator had touched the pair and was underway attempt to jump above the pair. The RSI that had knocked 76.54 over-bought levels appeared to play its role, dragging down the pair today.

The article was written by Bharat Gohri, Chief Market Analyst at easyMarkets

Forex Daily Recap – UK GDP Declined, Pushing GBP to Multi-Year Lows


Cable continued to travel below the zero-line of the MACD, luring the sellers. The investor sentiment dropped significantly in the backdrop of downbeat UK economic data releases. The ongoing Brexit chaos seemed to have an impact over the UK’s economy.

GBPUSD 1 Day 09 August 2019
GBPUSD 1 Day 09 August 2019

Notably, the UK Q2 GDP remained at the top of the trader’s daily event watchlist. The market had already forecasted the GDP figures to decline by 0.5% this time and report near 0.0%. Somehow, the actual GDP statistics came around -0.2%, shocking the market participants. Moreover, the June Manufacturing Production and Industrial Production data also published adverse reports. Despite that, the UK PM Boris Johnson remained stubborn over exiting UK irrespective of attaining a deal for a Brexit.


The Chinese Yuan pair continued to stay sustained within a multi-month uptrend channel. Quite noticeably, the MACD line had already crossed above the signal line at the start of August, favoring the bulls. Meantime, RSI stood near 81.03 overbought levels. At any point, this overbought RSI could have played its role in dragging down the pair. Anyhow, such a detrimental act has not taken place yet.

USDCNY 1 Day 09 August 2019
USDCNY 1 Day 09 August 2019

On the other hand, the Chinese economic docket showcased mixed data releases throughout the day. The July YoY Consumer Price Index (CPI) jumped 0.1% this time over the market hopes of around 2.7%. Also, the MoM CPI reported 0.4% in comparison to the 0.2% estimates. Somehow, the Chinese July YoY Producer Price Index (PPI) displayed -0.3% over -0.1% forecasts, pouring cold water on the pair’s daily positive drifts.


After testing the overhead red Ichimoku Clouds earlier this month, the bears had taken control over the pair’s daily price actions. Even today, the pair extended the previous day’s downward rally, hovering near 0.9733 level.

USDCHF 1 Day 09 August 2019
USDCHF 1 Day 09 August 2019

Anyhow, a stable 0.9694 support handle stood on the downside in order to cover up any potential losses. The base line and the conversion line of the Ichimoku Clouds were making rounds above the USD/CHF pair, encouraging the bears. At around 05:45 GMT, the July MoM Switzerland Unemployment Rate s.a. came in-line with the previous as well as the consensus estimate, recording 2.3%.


Canadian currency slipped following disappointing Jobs data thereby allowing the Loonie pair to climb fresh heights.

USDCAD 1 Day 09 August 2019
USDCAD 1 Day 09 August 2019

The July Net Change in Employment reported -24.2K over +12.5K street estimates. Also, the July Unemployment Rate rose 0.2% this time in comparison to the last 5.5%. Even the June MoM Building Permits came around -3.7% over +1.5% forecast. In the meanwhile, the July YoY Average Hourly Wages soared 0.9% over the last recorded 3.6%. Anyhow, the USD/CAD pair appeared to shrug over this upbeat data and refocused on the downbeat ones.


The Rand pair geared up on Friday, escalating towards the 1:1 Gann line, developing strong positive price actions. The RSI has crossed the 70 overbought benchmark, touching 76 mark, cheering up the bulls. Such a healthy upliftment in the pair came following abrupt growth in the Chinese Yuan.

USDZAR 1 Day 09 August 2019
USDZAR 1 Day 09 August 2019

South Africa relies highly on China for its Exports and Foreign Investment activities. Therefore, South African Rand currency remains highly correlated with the performance of the Chinese Yuan. With full ammunition intact, the USD/ZAR pair breached above the sturdy 15.1912 resistance that was restricting the upside since last few sessions.


Forex Daily Recap – China’s Currency Weapon Played, Dropping Yuan Past 7/Dollar


Over to Trump’s latest additional tariff duties on Chinese goods, the Yuan slipped and crossed the seven mark to the dollar threshold. The Relative Strength Index (RSI) of the USD/CNY pair shot up to 84.49 level, showing heavy buying in the currency pair. Notably, on its way to the upside, the pair had crashed through multiple resistances stalled near 6.9340, 6.9617, and 6.9756 levels.

USDCNY 1 Day 05 August 2019
USDCNY 1 Day 05 August 2019

Rob Carnell, Chief Economist & Head of Research for Asia-Pacific, ING, Singapore commented, “What has taken the market by surprise is that nobody anticipated that President Trump would slap tariffs on China within 24 hours of their trade talks. (I) don’t think any of us had imagined how quickly President Trump would slap on more tariffs. This makes it very hard for China to decide what it needs to do next. You don’t really know if the people you are talking to matter, and it turns out they don’t. So, you don’t want to make concessions and then get tariffed anyway. Then you’re losing both ways.”


Along with the Chinese Yuan currency that got hit massive sell-off over uprising trade tensions, the South African Rand (ZAR) also underwent plunges. Notably, China remains South Africa’s primary export market. Moreover, China ensures some good amount of Foreign Investment in this highly investment risky place. Hence, South Africa stays quite highly dependent on the Chinese economy.

USDZAR 1 Day 05 August 2019
USDZAR 1 Day 05 August 2019

Today, as the Yuan crossed through the 7/Dollar mark, the Rand touched 14.9462/Dollar mark. The pair had already provided strong bullish signals last day, breaking above the Ichimoku Clouds. If the USD/ZAR pair had moved further more upwards, then the 15.0056 resistance would have got activated.

US Dollar Index

The Greenback was heading south in the North American trading session, aiming to close the day on a negative note, making it a hattrick. Notably, the USD Index had attempted multiple times in the last few months to breach the sturdy 98.32 resistance. However, last week, the Greenback had made it happen, touching the 98.92 highest mark. Anyhow, since the last few sessions, the bulls appeared to shed their gains, handing over the control to the bears.

US Dollar Index 1 Day 05 August 2019
US Dollar Index 1 Day 05 August 2019

Today, the most crucial ISM July Non-Manufacturing PMI came out 2.61% below the market expectations. The market had expected the data to report near 55.5 points. Anyhow, the actual figures recorded near 53.7 points, luring the sellers. Nevertheless, a robust more-than-a-month old slanting ascending support line would have taken care of any drastic drop in the Index. Meanwhile, the upbeat July Markit PMI Composite and Services PMI ensured to limit the daily losses. The July Markit PMI Composite recorded 1.94% growth over the previous figures. Also, the Services PMI rose a 1.53% increment, reporting 53.0 points over market hopes of around 52.2 points. Meantime, the uprising trade tensions kept encouraging the bears, bringing down the Greenback.


On Monday, most of the EU members came up with their respective PMI data reports. Out of which, the market remained more concerned about the German and Eurozone data releases. Quite noticeably, the Eurozone July Markit PMI Composite data came out as per expectation, reporting 51.5 points. Anyhow, the German PMI slumped 0.98% this time over the prior 51.4 points.

EURUSD 1 Day 05 August 2019
EURUSD 1 Day 05 August 2019

Needless to say, Italy and France reported positive PMI data, expect Spain that missed estimates. On the technical chart, the EUR/USD was showing some resilient price actions, taking a bounce off the 1.1110 psychological support line. The Fiber kept marching upwards, breaking a 19-day old slanting descending support line. Even if the pair had attempted to climb more, then it could have encountered the overhead strong SMA conflux.


The Swiss Franc pair was forming a Double Top trading pattern, hinting for more upcoming bearish sessions. Also, a 2-month old major counter trendline had confined the pair’s upside for the last few months. However, quite remarkably, the USD/CHF pair had broken and moved above this aforementioned counter trendline. Anyhow, the counter trendline took back control over the Swiss Franc pair in today’s trading session.

USDCHF 1 Day 05 August 2019
USDCHF 1 Day 05 August 2019

Meanwhile, the Switzerland economic docket showcased some positive data releases. The June YoY Real Retail Sales came out +0.7% over -0.5% market estimates. Additionally, the Q3 3m SECO Consumer Climate recorded -8 points, staying above the consensus estimate of around -10 points.

The article was written by Bharat Gohri, Chief Market Analyst at easyMarkets

Forex Daily Recap – RBA Cuts Interest Rate by 25 bps


The Aussie pair remained seesawed throughout the day in the middle of RBA rate cuts. Australian economists and market experts had already expected a reduction in the interest rates this time. The policymakers declared a 25 bps rate cut marking the new interest rate near 1.25% over previous 1.50%. The Bank has performed a rate cut for the first time in the last three years. Following the RBA rate statement, the AUD/USD pair made a sudden jump of 0.30%, reaching near 0.6993 levels. However, the spike vanished within seconds and dropped back to 0.6965 levels. Also, earlier the day, Australian April MoM Retail Sales reported -0.1% over 0.2% estimates. Later the day, RBA Governor Philip Lowe mentioned that rate cut was to support the employment growth and maintain the desired inflation target. The Board also said that it would continue to monitor the developments in the labor market and adjust the monetary policy accordingly.


After rallying at the top speed last day, the Euro pair had managed to reach 1.1260 levels. Today, the EUR/USD pair upshot in the early hours after the release of positive Spain and Italy Unemployment figures. The Spain May Unemployment Change reported -84.1K over -67.0K forecasts. Also, the Italy April Unemployment figures came out 0.1% lower than the market expectation of 10.3%. Following such positive reports, the pair soared and reached near 1.1276 levels.

EURUSD 60 Min 04 June 2019
EURUSD 60 Min 04 June 2019

Though the Job-related figures recorded some pleasing data elevating the pair, adverse Eurozone CPI ate away the accumulated gains. The European Monetary Union (EMU) reported the May Consumer Price Index (CPI) 0.1% lower than the 1.3% estimates. Also, the EMU CPI Core data came out as 0.8% over 0.9% forecasts.

USD Index

The fall in the Greenback appeared to pause after rebounding from the 97.00 bottom levels. USD Index made the opening on Tuesday morning near 97.20 levels and was trading near the same mark at around 17:13 GMT. The Buck touched the lowest point after positive Unemployment Eurozone data pushed the major rival EUR/USD pair upwards. Today, Fed Chair Powell responded to the market recession fears, addressing over chances of a rate cut. Powell said that the Bank would take appropriate steps to sustain economic expansion. The Central Bank Chairman mentioned that the Bank would closely monitor the trade issues, maintaining the 2% inflation target. Meanwhile, the US April MoM Factory Orders data reported -0.8% in comparison to the -0.9% consensus estimates.


By day end, the Loonie pair continued to move in correlation with Greenback’s downward movement. The USD/CAD pair had remained consolidated near 1.3440 levels in the Asian session. The pair kept attempting to jump but failed to do so and remained capped under 1.3448 levels.

USDCAD 60 Min 04 June 2019
USDCAD 60 Min 04 June 2019

Meantime, the Crude Oil WTI Future was trading lower throughout the day, marking the day’s low near $52.44 bbl. The Commodity’s price kept plunging amid escalating trade tensions and Russia’s disagreement with the OPEC group. Russia remains stubborn over not extending the supply cuts beyond the end of June.