Will Exotic currencies help you benefit in your forex business? As defined in the dictionary of traders, an exotic currency is a type of legal tender that is usually paired with dollars. Despite being paired to a strong currency, exotics are less volatile than the major currencies because they come from developing currencies. As someone who is trading from a developing country, one of the dilemmas or fears is the possibility of obtaining less profit when one uses their local currency in their trading accounts. Is this true? Today’s goal is centered on the discussion of local payments being used in the market. We shall discuss its advantages and the potential risks that you are bound to meet once you decide to deal in the market via these types of currency.
Defining Exotic Currency
This is the type of currency that is not usually traded by forex traders because they are less volatile than the other form of currencies. Most of the time, these currency types come from developing countries. Samples of this currency include Chinese Yuan or Renminbi (CNY), Russian Rouble (RUB), Hong Kong Dollar (HKD), Singapore Dollar (SGD) and others.
Advantage of using exotic currencies as a payment
1.Advantage over domestic competitors
For traders who are into the acceptance of exotic currencies, they have the advantage of winning lower rates compared to those that require foreign currencies and their business as they can have stable prices, cheaper prices and good quality of goods.
2. Advantage of transacting for the adjustment of payment terms
When a business pays in major currencies such as US Dollars, the tendency is that they will require you to settle your accounts at a lesser time frame because they will have to make sure that currency issues should not affect the amount of the given payment. This is not the case for local payments, businesses will usually grant your appeal to settle your payments at a longer time if you use exotic currencies as they do not have to worry about fluctuations of rates in the market.
3. Discounts on purchased items
When we go shopping for things, it is much better to decide to pay using local or exotic currencies as business establishments would most likely give discounts to these types of payments. This is not just applicable for shopping areas, if you are a businessman and at the same time a forex trader, you would most likely get discounts from exporters if you pay using local or exotic currencies.
4. Obtain good trading partners
As an entrepreneur with linkages in the import and export industry, paying in local currencies can help obtain loyalty and goodwill with your overseas partners as this gives them a notion that you value their decision to accept local payments which will later help them get better profit rather than paying in foreign currencies such as USD or Euro.
Though exotic currencies have low volatility in the market, some clients and even business owners can have great benefits with the use of such currency. This therefore tells us that every type of currency, even when it is not so in demand in the market, possesses a certain value and advantage to some individuals.