Given that the dirham (AED) has been pegged to the dollar at 3.6725 since 1997, a weakening dollar would lead to the Emirati currency also posting losses against the euro, pound, yen and others. Generally, though, the dirham is very rarely traded as a CFD, so other regional markets like Turkey, South Africa, Mexico, Thailand and so on are in greater focus.
The yuan renminbi also has a soft peg to the US dollar, and most emerging economies have China as their main trade partner, so the effect of a weaker dollar on these economies is likely to be positive. Higher prices for the various commodities and minerals exported to China could lead to strengthening for emerging currencies.
Traditionally, traders in the UAE favour major commodities, especially gold and Brent, above forex. A weaker dollar should usually be a positive factor for these as well given that they’re normally priced in dollars internationally. This is reflected in Brent having reached an 11-month high above $57.30 a barrel last week, but gold hasn’t shown strong growth since August.
With bitcoin having broken its parabolic advance and buyers seemingly exhausted after such a long period of extremely strong gains, there now seems to be little impetus to push up and reach a new high.
Meanwhile, specialists in trading commodities have had the potential to outperform those focusing on forex over the last few weeks, and obviously many crypto traders have made big gains since the end of last year. Given commodities’ sensitivity to the early stages of inflation, the former of these groups is likely to retain prominence over the next couple of quarters.
However, the situation for crypto seems much less certain. With bitcoin having broken its parabolic advance and buyers seemingly exhausted after such a long period of extremely strong gains, there now seems to be little impetus to push up and reach a new high.
Considering strategy itself rather than application, clearly short-term traders continue to hold the edge. Uncertainty might not be in main view now, but it’s still present in the background: there is no consensus on how long it might take for vaccines to become widely available and economies to return to something like normal.
Equally, new strains of Covid-19 spreading from the UK, South Africa and others have led to many politicians and medical advisers to governments to switch from the previous narrative of ‘living with Covid’ to talk of eradication. These factors and the potential for sentiment to change rapidly mean that scalpers and day traders have the edge over swing traders in CFD markets, at least for the moment.
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