Foreign exchange rates represent a popular underlying asset for binary options. Over the last few months, the development on the international currency markets has offered great chances for investors and also in the near future, the exchange rates are likely to stay volatile. This applies to the currency rate from euro to US-dollar as well as to euro and British pound or dollar and yen. Also less popular currencies offer interesting opportunities, for example the Australian or the Canadian dollar as well as the Swedish crown or the South African rand.
Many investors investing in binary options bank on the development of certain currency pairs. This investment method is especially profitable because -compared to forex-trading- you know from the very beginning how high the possible return is. The losses are limited to the purchase price of the respective option, too. That means that beyond this price, there is no risk. Another advantage is the fact that you only have to keep your eye on the development of two particular currency pairs. In order to successfully operate with binary options in this case there is no high analysis effort required.
Euro wins thanks to positive news
With regard to the euro in the recent past especially the less dramatic situation of the debt-ridden states of the euro zone has been responsible for relief. After the successful debt buyback of Greece and after positive news from Ireland and Portugal a few weeks before, the euro -compared to the US-dollar- has been developing to its highest level in the last eight months in the middle of December.
Another reason for increasing euro rates are the sales in the foreign exchange trade that are relatively low shortly before Christmas. Many speculators having banked on a decreasing euro rate now have to stock up on this currency. Due to the generally low sales this leads fast to a relatively high increase of the currency. In addition, the positive development of the euro is not only notable towards the dollar. Also towards the Japanese yen the euro has increased over the past few months.
Politics play an important role for currency markets
Another very important currency for many investors is the British pound. The development of this currency is closely connected with the politics in the euro zone since the British economy strongly depends on the exports to the continent. However, the very bad economic data has not lead to a sustainable weakening of the pound over the last few years, quite the contrary. Compared to the euro, the pound has lately developed very well and also compared to the US-dollar, the British pound recorded the highest level since three months in the middle of December.
In Japan, the elections where the conservative LDP scored a landslide victory caused a possibly aggressive growth policy. The financial restructuring of the budget thereby takes a back seat although the deficit is already extremely high now. For this reason, the monetary policy of the Japanese central bank is more likely to become more expansive what could lead to a clear weakening of the yen in the medium term. Already a short time after the elections, the devaluation trend towards the euro and the US-dollar continued.