The exotic waters of emerging market currencies

While the vast majority of forex trading occurs in the so-called “majors” — the currencies of G-10 countries — some retail forex brokerages are beginning to expand their offerings to include emerging-market or “exotic” currencies. Such currencies include the Mexican peso, South African rand, Singapore dollar, Thailand baht, Brazilian real, and Hong Kong dollar. There are many reasons forex trading revolves around a handful of currency pairs, most of which include either the U.S. dollar or the euro, but the most important are liquidity and stability.

It’s often said the forex market is the most liquid in the world, and that liquidity is based on the stability of a few countries and regions that, through history and fortune, have come to dominate global trade and finance. It is no coincidence that oil and gold are priced globally in dollars. For example, Brazil is a developing country at the forefront of a Latin American boom — several countries are bucking for “first-world” status. But despite the fact it’s had one of the hottest currencies in recent years, Brazil has gone through a few “new” currencies in the past two decades as its economy has busted and boomed. Nonetheless, some emerging market currencies are edging into the mainstream of the forex world.