Different Emerging Market Currencies in 2021
The nations hanging between developing and developed countries are the emerging markets and use their emerging market currencies to trade. These countries experienced rapid economic growth in the past years and are still growing.
The political and social transition is why these developing countries find it easier to mingle with other economies in the world. However, there are no definite emerging market currencies because big monetary bodies use different metrics for categorizing.
A Snippet of What Happens In an Emerging Market Economy
During the transition period, the countries with emerging economic markets grow from having low income, minor developments, and pre-industrial economies and become modern economies with higher living standards.
Investors prefer these markets because they are likely to get great returns from economic growth. However, some of them are also cautious because these markets also expose the investors to inherent risks.
Some of the risks investors expose themselves to in emerging markets are domestic infrastructure problems, political instability, unpredictable currency changes, and illiquid equity. One thing that discourages outside investors in these markets is, the local stock exchange does not offer them liquid markets.
Another significant advantage of investing in developing countries is their physical and financial infrastructure, like a unified currency and stock exchange. Moreover, as they grow, they assume reforms and institutions that resemble those of developed countries. That helps them in promoting economic growth.
Type of Investments in Emerging Market Economies
These markets pay more attention to industrial and manufacturing activities and pull away from agricultural and extraction activities. Trades that promote the global economy like exports and imports are also common in these nations.
Other domestic programs they expand are the education systems, infrastructure, and imposing legal reforms to give investors more and better property rights.
Criteria Used to Classify Market Economies
Different observers use different ways to classify the market economies. Some pay attention to income levels, quality of financial systems, or growth rates. As a result, the list of emerging economies one observer produces might not match with another's.
The countries in the list keep changing because some either upgrade to developed countries or downgrade to frontier nations. The list can also increase if a developed country downgrades to developing. The opposite of that also happens, where a frontier country upgrades to a developing country.
The countries in the list of emerging markets can vary, depending on the observer. BRICS is the acronym for the five emerging markets; Brazil, Russia, India, China, and South Africa. Jim O'Neill, an American science and technology investor, is the founder.
The criteria behind the creation of BRICS is the belief that these countries have a rapidly growing economy and will be the future dominant suppliers of raw materials, services, and manufactured goods.
China and India are significant suppliers of manufactured goods and services, Brazil and Russia are common suppliers of raw materials. South Africa's economy is rapidly growing because it produces precious minerals like gold and automobile manufacturing.
That said, let us now look at the emerging market currencies.
Brazilian Real (BRL)
The BRL is the official currency of Brazil, and it is at rank 20 of the most traded currency globally. The currency has been in circulation since July 1994, intending to stabilize and grow Brazil's economy.
This country had significant growth in 2000-2012, and it was due to the commodity boom in the mid-2000. However, a political crisis in 2013 led to a slow down in the economy until 2017.
Brazil is known for exporting iron, ore, agricultural products, and manufactured goods. Brazil's gross domestic product is at $1.49 trillion as of June 2021.
Russian Ruble (RUB)
The Russian Ruble stands at rank 17 of the most traded globally. This is because Russia heavily depends on the export of commodities like coal, oil, and natural gas, and these are why this country's economy is rapidly growing.
The country's currency is also closely correlated with these commodity prices worldwide. The currency dropped against the dollar in 2014 and 2015. There was global oil price tumbling in the two years.
The annexation of Crimea by the Russian federation led to the imposition of economic sanctions against the nation. However, in 2016, this country's economic growth began, and there was a 0.2 percent growth.
The economy is still growing, and Russia records a GDP of $1.71 trillion as of June 2021. This is 2.8 percent more than 2020. The pandemic affected the air transportation industry in the country, but there is a likelihood of rapid growth in fossil fuels production.
Indian Rupee (INR)
The INR is India's official currency and ranks at the 16th position of the most traded currency globally. India's economy has been growing rapidly between 1998 and 2017, and it has a record of 7.1 percent annual GDP growth annually in those years.
India's estimated GDP in 2021 is $3.05 trillion, with the largest economy ranking at 6th position globally. India is the largest producer of milk and the second-largest producer of wheat, sugarcane, and groundnuts. It is also famous for producing spices and poultry.
Chinese Renminbi (CNH)
The Chinese Renminbi ranks at the eighth position of the most traded currency globally. The country's GDP has been growing with an average of 9.1 percent annually between 1998 and 2017. China estimates $16.6 trillion in GDP in 2021, making it the second-largest national economy in GDP.
There are claims that china's CNH is undervalued against the US dollar, which makes the country's exports competitive. This enables the government to maintain a trade surplus with other economic giants.
South Africa rand (ZAR)
Sound Africa's economy has been growing, with the rand gaining more value against the dollar. It ranks as the 18th most traded currency globally.
South Africa has an estimated GDP of $326.5 billion as of June 2021, which brings it to the 39th largest economy globally.
However, the country continues to pull through regardless of political instability and corruption. These caused a subdue in the economic growth in 2018 and 2019.
The developing countries make the emerging markets. These are economies experiencing rapid growth. These countries face some negative factors, but their past growth makes them continue to trade globally with their emerging market currencies.