Volatility in the CFA franc
Foreign exchange rate volatility can be devastating for an economy. But forex traders, especially short-term players, can take advantage of the high risk huge payoff environment.
The CFA franc has been under scrutiny for a while now. The CFA franc is currently pegged to the euro with 50% of its forex reserves currently held by the French treasury. The New York Times reports that African activists and economists are arguing that this arrangement is monetary imperialism. With the French treasury holding the currency at interest rates lower than its inflation, critics suggest France is profiting from the CFA control.
On the other hand, experts say that pegging the CFA to the euro stabilized the Francophone African economies relative to neighboring countries. It has also provided opportunities for economic growth.
In addition, another regional economic block, the Economic Community of West African States (ECOWAS) is planning to launch its own alternative regional currency ECO by 2020. According to an Al Jazeera report, this will give countries using the CFA franc an alternative. Provided that this could increase internal trading, it can challenge CFA franc use in the region.
Following the new regulations and efforts in Central Africa to stabilize foreign exchange rates, there isn’t a better time to start trading than now.
