The “exotic pair” is a forex term for a pair which includes one thinly traded (exotic) currency. Exotic currencies are not liquid and are traded at low volumes. They are called exotic because they are not usually traded in a typical brokerage account. Examples of exotic currencies are the Thai baht, the Russian ruble, the Israeli shekel or the Singapore dollar.
The level of interest in exotics is low and so is the activity in the exotic currency market. Consequently, trading some of those currencies may have a high cost and can be associated with a high risk.
However, high risks can also generate good chances for high profits. Besides some of the so called exotic currencies such as the Israeli shekel or Singapore dollar are very well established and very stable. The reason of their inclusion in the exotic set is that these countries are small and the demand for the currency is low.
Many exotic currencies must be analyzed thoroughly since the market is not always secure. In particular, the political and financial environments in Asia, the Pacific, the Middle East and Africa may change drastically causing the country’s currency to rise or fall in value.
Perhaps it is a good idea to trade a certain exotic currency if you are a resident of this particular country. In this case you have a good understanding of the political and economic situation and may easily anticipate when the market becomes unstable and unpredictable.
Examples of the exotic pairs are:
USD/MXN, SGD/JPY, EUR/PLN, USD/TRY, USD/PLN, EUR/TRY, EUR/CZK, USD/RUB, USD/CZK, EUR/HUF, USD/ZAR, USD/HUF, USD/SGD, TRY/JPY, HKD/JPY, ZAR/JPY, USD/HKD, USD/ILS,
where MXN stands for Mexican peso, SGD-Singapore dollar, PLN- Polish zloty, TRY- Turkish lira, CZK- Czech koruna, RUB- Russian ruble, HUF- Hungarian forint, HKD- Hong Kong dollar, ZAR-South African rand, ILS-Israeli shekel.
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