meed-logo

line1 line2 line3
SIGN IN / REGISTER

Navigating the impact of digital currencies on forex markets

23 July 2024

 

The financial landscape is undergoing a seismic shift with the advent and increasing adoption of digital currencies, and as they gain traction, their influence on traditional foreign exchange (forex) markets is becoming more pronounced.

This transition presents both challenges and opportunities for traders and investors, particularly in markets like the UAE, which are rapidly evolving.

The integration of digital currencies into traditional forex markets is already reshaping the financial landscape. For traders and investors in the UAE, this transition necessitates a strategic approach to navigate the volatility, manage risks, diversify portfolios and address liquidity issues effectively.

Digital currencies are characterised by a high degree of volatility and can fluctuate within short period of time. This is unlike traditional fiat currencies, which tend to experience gradual value changes influenced by macroeconomic factors.

Market sentiment can have a significant impact, especially on the less liquid digital currencies. Bitcoin, the most well-known digital currency, has seen its value swing wildly, driven by market sentiment in relation to regulatory news and market developments.

High volatility is a double-edged sword – it carries opportunities, but also amplifies risks. It also creates opportunities, and traders leveraging technical analysis and quick decision-making can capitalise on price swings.

Disparities in liquidity across different exchanges can create arbitrage opportunities for savvy traders, but this requires a high level of research, resources and technical knowledge to be adequately exploited.

Digital currencies can also serve as a hedge against fiat currencies.

In the UAE, where the dirham is pegged to the US dollar, digital currencies can be a means to hedge against dollar exposure. At the same time, the volatility can also expose traders to significant losses, so managing this risk requires sophisticated strategies and tools.

Managing risk

The relative novelty of digital currencies means that they can be subject to speculative bubbles, making it challenging to predict long-term value trends.

Effective risk management is therefore crucial when dealing with digital currencies. The high volatility and 24/7 nature of digital currency markets require traders to adopt robust risk management practices, including the traditional tools that more than ever are key to protection and success.

Implementing stop-loss orders helps to limit potential losses by automatically selling a position when it reaches a predetermined price. Proper position sizing ensures that a single trade does not disproportionately impact the overall portfolio, mitigating the risk of significant losses.

When it comes to using such tools in digital currency trading, traders need to factor in that considerable gaps might form between prices and the available liquidity, making it difficult to trigger stop-losses at the desired prices. Therefore, the position sizing should be determined accordingly.

Another aspect to be considered is the relative lack of historical data: unlike traditional forex markets, digital currencies lack extensive historical data, making it harder to apply conventional risk models.

Even the data set of the most established digital currencies, like Bitcoin or Ethereum, which have a longer history, are to be analysed with caution as the older data refers to a completely different market in terms of liquidity, volume of transaction and actual status of the asset.

Additionally, while major digital currencies like Bitcoin and Ethereum enjoy increasingly higher levels of liquidity, many altcoins suffer from low trading volumes.

Low liquidity in certain digital currencies can lead to significant slippage, where trades are executed at prices different from those expected.

Furthermore, the regulatory environment for digital currencies is still evolving, meaning that unexpected regulatory changes can significantly impact market dynamics and trader positions.

Ensuring the use of reputable exchanges with robust liquidity is essential.

UAE potential

The UAE has shown a progressive attitude towards digital currencies, positioning itself as a hub for blockchain innovation and digital asset adoption.

The government’s proactive stance, coupled with a robust financial infrastructure, creates a healthy and reliable environment for integrating digital currencies as an asset for investment portfolios and trading.

The UAE has established comprehensive regulations to govern digital currencies, enhancing market integrity and investor protection. This regulatory clarity attracts global investors and fosters confidence in digital currency markets.

The involvement of institutional players in the UAE – such as banks and financial institutions – in digital currency markets is also set to grow, and this institutional interest will bring additional liquidity and stability and help mitigate some of the volatility and liquidity issues.

The UAE’s infrastructure supports digital currency transactions and innovation, and this is crucial for the efficient functioning of digital currency markets and their integration with traditional forex trading.

In approaching digital currency for trading and investment, it is crucial for traders to understand the characteristics of the various currencies and ensure that exposure is in line with the investors’ risk appetite and tolerance.

As digital currencies continue to evolve, staying informed and adaptable will be key.

The UAE’s supportive regulatory environment and technological advancements position it well to leverage the benefits of this shift while mitigating the associated risks.

By embracing these changes with a well-rounded strategy, traders and investors can leverage the potential of digital currencies to enhance their trading and investment outcomes.

https://image.digitalinsightresearch.in/uploads/NewsArticle/12177946/main.jpg

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Riyadh sets December deadline for Prince Mishaal Road

    20 November 2025

     

    The Royal Commission for Riyadh City (RCRC) has allowed contractors until 3 December to submit bids for a contract to develop Prince Mishaal Bin Abdulaziz Road Axis-Taif Road in Riyadh.

    The previous deadline was 19 November.

    The scope of work covers general road improvement works, including street upgrades, drainage works, relocation of existing utilities, dry and wet utilities, and other associated infrastructure. RCRC is investing in improving the road network in and around the kingdom's capital.

    Earlier in November, MEED reported that RCRC had begun post-tender clarifications with bidders for a contract covering upgrade works on Najm Al-Din Al-Ayoubi Road in Riyadh.

    The scope of work covers general road improvement works, including upgrades to three bridges at Al-Zahabi Road, Abdulrahman Adakhel Road and Atia Al-Saady Road.

    In February, RCRC announced plans to develop eight road projects in Riyadh at an estimated cost of more than SR8bn ($2bn).

    The projects form part of the second group in the Riyadh Ring Roads and Main Axes development programme.

    The schemes include:

    • The northern part of the Prince Turki Bin Abdulaziz Al-Awwal Road development project, with a length of more than 6 kilometres (km). The scope includes the development of two main intersections, the construction of three bridges and a tunnel.
    • The middle section of the Al-Thumama Road Axis development project. The scheme will cover about 10km and includes the development of five main intersections and the construction of 11 bridges and five tunnels.
    • The Imam Abdullah Bin Saud Road development project, which will stretch about 9km and includes the development of four main intersections, the construction of three bridges and two tunnels.
    • The Dirab Road development project, which will cover 9km and includes the development of two main intersections and the construction of nine bridges.
    • The Imam Muslim Road development project, which stretches 12km and includes the development of four main intersections and the construction of four bridges. The project will serve as the future extension of the Prince Turki Bin Abdulaziz Al-Awwal Road Axis to the south.
    • The road network development project surrounding King Abdullah Financial Centre, with a length of 20km. This includes the development of three main intersections and the construction of 19 bridges.
    • The construction of a bridge at the intersection of King Salman Road in the east with Abu Bakr Al-Siddiq Road in the north.
    • The first package of engineering modifications for crowded sites in Riyadh, encompassing improvements to alleviate traffic congestion during peak times.

    In August last year, RCRC confirmed it had awarded four contracts worth SR13bn ($3.46bn) as part of the first phase of the programme to develop the city’s road network.

    RCRC said the first phase will develop the axis of the main and ring roads to improve traffic movement in the city.

    Other major projects by RCRC include Riyadh Metro, Riyadh Art, Sports Boulevard, King Salman International Park and the Green Riyadh project.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15123861/main.jpg
    Yasir Iqbal
  • Riyadh advances with rail link prequalifications

    20 November 2025

     

    Saudi Arabia Railways (SAR) is expected to begin the second stage of the prequalification process for a contract covering the construction of a new railway line, known as the Riyadh Rail Link, which will run from the north to the south of Riyadh.

    MEED understands that the consortiums need to propose self-funded financing arrangements for the project as part of the new round of prequalifications.

    Contractors submitted their initial prequalification documents earlier this month.

    The scope of work includes constructing a 35-kilometre-long double-track railway line connecting SAR’s North-South Railway to the Eastern Railway network.

    The contract also covers the procurement, construction and installation of associated infrastructure such as viaducts, civil works, utility installations, signalling systems and other related works.

    The project is expected to form a key component of the Saudi Landbridge railway.

    The Saudi Landbridge is an estimated $7bn project comprising more than 1,500km of new track. Its core component is a 900km new railway between Riyadh and Jeddah, which will provide direct freight access to the capital from King Abdullah Port on the Red Sea.

    Other key sections include upgrades to the existing Riyadh-Dammam line and a link between King Abdullah Port and Yanbu.

    The start of tendering activity for the Riyadh Rail Link project makes the construction of the Saudi Landbridge more likely. 

    The project is one of the kingdom’s most anticipated infrastructure programmes. Plans to develop it were first announced in 2004, but the project was put on hold in 2010 before being revived a year later.

    Key stumbling blocks were rights-of-way issues, route alignment and its high cost.

    In December 2023, MEED reported that a team of US-based Hill International, Italy’s Italferr and Spain’s Sener had been awarded the contract to provide project management services for the programme.

    If it proceeds, the Landbridge will be one of the largest railway projects ever undertaken in the Middle East – and among the biggest globally.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15123411/main.jpg
    Yasir Iqbal
  • Local contractor bids low for $629m Kuwait oil project

    20 November 2025

    Kuwait-based Mechanical Engineering & Contracting Company (MECC) has submitted the lowest bid on a contract to develop oil and gas facilities at the Sabriya and Bahra oil fields.

    The scope of the project is focused on developing a water separation facility next to Gathering Centre 23 (GC-23) and GC-24.

    It also includes developing an injection facility at GC-31.

    The full list of bidders for the project is:

    • Mechanical Engineering & Contracting Company (MECC) – KD193m ($629m)
    • Spetco – KD229m
    • Alghanim International – KD239m

    The tender was issued on 15 December 2024, with an initial bid submission deadline of 16 March 2025.

    The bid deadline was extended more than 10 times before prices were submitted.

    The client on the project is state-owned upstream operator Kuwait Oil Company (KOC).

    The scope of the project includes:

    • Installation of a high-integrity pressure protection system
    • Installation of chemical injection systems
    • Installation of effluent water transfer pumps
    • Installation of a low-pressure (LP) gas pipeline from the new LP gas knockout drum (KOD) to existing LP separator gas crude accumulator (inside GC-23 & 24)
    • Installation of interconnecting piping, instrumentation, electrical and civil works
    • Installation of a new oil recovery system with pumps, flowmeter and analyser
    • Installation of the substation and its equipment/systems
    • Installation of tie-ins for process and utilities from/to existing GC-30 to new injection facility
    • Installation of sludge collection, treatment and disposal system
    • Associated facilities

    Kuwait is trying to boost project activity in its upstream sector.

    The country’s national oil company, Kuwait Petroleum Corporation, aims to increase oil production capacity to 4 million barrels a day (b/d) by 2035.

    In August, Kuwait announced that it was producing 3.2 million b/d.

    Earlier this month, KOC said it was planning to spend KD1.2bn ($3.92bn) on its exploration drilling programme through 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15120909/main.png
    Wil Crisp
  • Oman’s Marafiq retenders Duqm desalination plant

    20 November 2025

    Register for MEED’s 14-day trial access 

    Oman-based Central Utilities Company (Marafiq) has reissued the main contract tender for its planned seawater reverse osmosis (RO) desalination plant in Duqm.

    The revised submission deadline is 25 November.

    The project has an estimated budget of $100m and will supply industrial water and support wastewater services in the Duqm Special Economic Zone.

    The scheme involves building a seawater RO plant, an intake system, pre-treatment facilities, pumping stations, metering stations, pipelines and associated infrastructure.

    Marafiq is developing the project in its capacity as the authorised utilities provider for the Duqm Special Economic Zone.

    The company intends to develop a plant with a capacity of 45 million litres a day to serve industrial customers, including a planned hot-briquetted iron (HBI) facility proposed by an international steel manufacturer at Duqm Port. 

    Spain’s Cobra Group and Oman’s Global Chemicals & Maintenance System were previously prequalified to bid for the engineering, procurement and construction contract.

    The main contract was initially tendered in December 2024, with the bid submission deadline in February. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15116821/main.jpg
    Mark Dowdall
  • Wood Group wins Iraq oil contract

    20 November 2025

    Register for MEED’s 14-day trial access 

    Aberdeen-based Wood Group has won a contract to deliver project management and engineering services for PetroChina at the West Qurna-1 oil field in southern Iraq, according to a statement from the company.

    Under the terms of the contract, Wood will manage engineering, procurement and construction (EPC) projects at the field. 

    Located approximately 50 kilometres northwest of Basra, West Qurna-1 holds more than 20 billion barrels of recoverable reserves.

    Ellis Renforth, Wood’s president of operations for the Europe, Africa and Middle East region, said: “This contract award deepens our decade-long partnership at West Qurna-1 and reflects the continued trust placed in Wood to deliver complex energy solutions in Iraq. 

    “We’re proud to combine our global expertise with a strong local workforce to help support Iraq’s energy ambitions.”

    The contract will be delivered by nearly 200 Wood employees based in Iraq and the UAE, the company said.

    On 17 November, in a vote, 88% of Wood Group’s shareholders backed the company’s takeover by Dubai-based Sidara.

    The vote came after months of delay, while Wood struggled to agree its accounts with its auditor.

    The company’s accounts were eventually published on 30 October, showing a pre-tax loss of more than £2bn and evidence that the auditor was still not satisfied with the figures going back several years.

    Wood Group accepted a $292m conditional takeover bid from Sidara in August.

    As of February, Wood Group employed 35,000 people across about 60 countries, many in consulting and engineering roles.

    In the Middle East, the company has project contracts in Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, where it has opened its third office in Sharjah.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15122155/main.png
    Wil Crisp