The UAE is undoubtedly regarded as a commercial hub in the Gulf Region and not, it also set to emerge as a foreign exchange trading hub in the region, said a senior official of ADS Securities, the Abu Dhabi based Forex and commodities and trading platform.
Claus Nouveau-Nikolajsen, ADS Securities, Head of Sales, GCC & MENA, states: “The UAE has been at the forefront of financial industry development in the GCC and offers the most conducive environment for the growth of the forex marketplace and infrastructure. Trading of both major and emerging market currencies in the UAE is on the rise, and with international trade growing rapidly, the need for currency management will only increase. The expected upgrade of the UAE to emerging market status by index provider MSCI will have a significant impact on investment flows into the country, which in turn will also boost the country’s forex market.”
He states that as the markets continued to experience record instability, a number of investors had become cautious and stay away from traditional investment instruments like real estate and equities. This has made Forex trading a top choice among investors in GCC. With market volatility going at an all time, exchanging currencies is now seen as perhaps the only investment class that allows opportunities for investors to gain the returns they are aiming for.
“Since the launch of our platform we have had a rapid rise in the number and range of investors trading forex. In particular, regional traders realise that they can create alpha with a local player offering some of the best prices and spreads in the world without the additional costs associated with overseas firms who only have sales operations based in the Middle East,” he added.
A number of driving elements, including economic uncertainties around the world, have led to the exponential growth of the Forex market which has a $4 trillion trade a day volume – this is three times as much as the rest of the financial markets combined.
Over the past few weeks, several major currency pairs have performed quiet exceptionally well. The most widely traded pair Euro/Dollar pair recently set its record of its highest volatility since the peak of the financial crisis in the late 2008. “Intra-day volatility today has grown to extremely high levels and as global economic worries show no sign of abating, this is expected to continue,” pointed out Nikolajsen.
Currency trading in the GCC region has responded well to global trends. The continuous downfall of the US dollar has caused businesses in the region to pay close and thoughtful attention to their exposure to currency risks. “Over the last few years, the US dollar has been comparatively stable, so there was little need for currencies pegged to the US dollar to manage their treasury positions. Recent volatility and decline in liquidity across traditional markets have created a real need for sophisticated currency management,” Nikolajsen said.