Keep an Eye on Country Risk in Forex
There are times when trading on the market can be influence by things outside the normal economic conditions/market strength of a currency. In recent years, there has been a great deal of civil unrest in certain countries which had previously been relatively stable. Although these countries were never among the majors (strongest and most fluid currencies) they were still powers to be reckoned with on an international level. The first one that comes to mind is Greece with all the riots and civil unrest. It could have led to the government’s intervention in the market, which did happen to some extent.
Next on the list is the current unrest in Egypt. There are public demonstrations and civil unrest which could lead this wealthy nation to a state of civil war. Although it is still too early on to determine what will happen with that country, and their currency is not one of the majors or even one of the commodities, it still is a great example of what you should be watching for when trading currencies. Country Risk is the term for a government intervening in the market which will have a significant impact on the value of that country’s currency. In other words, unless you want to take on a greater amount of risk, steer clear of buying any currencies from nations that may be in danger of government intervention in their markets. However, if you are in it for the long haul and are willing to hold for a period of time, buying long would be ideal. It’s a gamble, but if the country’s economy bounces back, you could realize a significant profit.