- There has been a month to month growth of 25 to 50 per cent in forex accounts globally
- CBK data shows that foreign currency bank deposits held by Kenyans jumped by Sh14.7 billion in February to reach a historic high of Sh625.9 billion.
The coronavirus fears saw individuals across the world convert local currencies into stronger ones, especially the US dollar, leading to a spike in forex trading.
The latest report by global foreign exchange research firm IronFX shows a month to month growth of 25 to 50 per cent in forex accounts globally, with 220,000 new accounts created between March and June.
Trading volumes also rose sharply between March and June, increasing by approximately 300 per cent.
''The growth rates were more pronounced in developing countries, with traders’ accounts from Africa, Eastern Europe, and Southeast Asia making up 60 per cent of the new accounts.,’’ says the report.
Trading markets vary, as some traders focus solely on safe-haven commodities and currencies, while others try to leverage opportunities, such as the fluctuating demand for crude oil.
The steep increase in trading activity and account numbers, the report says placed substantial pressure on forex brokers.
Extensive growth such as this is an extremely rare industry, with the decade average daily forex trading volume increasing by no more than 40 per cent.
Andreas Efstathiou, a senior researcher at IronFX said the staggering change is a direct result of this year’s unusual financial and economic climate, leading to a series of high-impact factors.
“The profit potential it signifies is undoubtedly a major pull factor for traders who wish to leverage on price swings. However, other sociological trends may have contributed, as well,’’ he said.
He added that working from home has given traders more time to focus on trading, with people actively looking for new income channels due to the shadow of a looming financial crisis.
''They have time to learn more about trading and may feel like global events present a unique opportunity to make a profit. Naturally, this means a higher interest in the market and more trading activity,’’ Efstathiou said.
The global rush to safeguard the value of money saw the high demand for stronger currencies like the US dollar and Euro, with weaker ones depreciating.
Kenyan shilling for instance has since dropped from 102 in late February, hitting a high of 108.30 last month. Yesterday, it closed at 108.05 against the greenback.
Central Bank of Kenya (CBK) data shows that foreign currency bank deposits held by Kenyans jumped by Sh14.7 billion in February to reach a historic high of Sh625.9 billion.
According to the research firm, further outbreak ‘waves’ expected in the upcoming months and years will see the underlying causes remain in effect or re-emerge as soon as Covid-19 cases increase.
It concluded that ''Lockdowns and social distancing mean market volatility will remain high, and remote work will keep traders focused on forex markets’’.