Forex trading set to soar in Gulf countries

As markets experience volatility and investors shy away from equities and real estate, forex is becoming the investment class of choice in the Gulf region, according to ADS Securities.

"With high levels of volatility becoming the norm, rather than the exception, forex is now seen as perhaps the only investment class that presents investors with opportunities to gain the returns they are looking for," ADS Securities head of sales, GCC & MENA, Claus Nouveau-Nikolajsen said.

According to Nouveau-Nikolajsen, economic uncertainty and currency fluctuations have led to growth in the global forex market, where the daily turnover is estimated at $4 trillion, three times as much as the rest of the financial markets combined.

Over the past few weeks, many major currency pairs have seen exceptional levels of trading.

The euro/dollar recently recorded the most exacerbated volatility since the height of the financial crisis in 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," Nikolajsen said.

Forex trading in the Gulf Cooperation Council region -- comprising Saudi Arabia, Qatar, the United Arab Emirates, Bahrain, Kuwait and Oman -- has responded to global trends.

The weakness of the US dollar has made businesses in the region pay close 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 dollar to manage their treasury positions. 

"Recent volatility and a decline in liquidity across traditional markets have created a real need for sophisticated currency management," Nikolajsen said.

Nikolajsen feels that the UAE is set to emerge as the hub of forex trading in the region.