Mongolia

Mongolia supervises non-bank financial markets through the Financial Regulatory Commission, with the Bank of Mongolia responsible for monetary policy and banking. The country's currency is one of the purest commodity plays available.

A currency on the mining cycle

Mongolia's exports are dominated by coal, copper and gold, sold overwhelmingly to a single customer, China. That concentration makes the tugrik unusually sensitive to two things: commodity prices, and Chinese demand.

The pattern has repeated. A mining investment boom in the early 2010s brought enormous capital inflows and rapid growth; when commodity prices fell and a major investment dispute stalled, the inflows reversed, the tugrik depreciated sharply, and the country required an IMF programme. The sequence — boom, currency strength, reversal, sharp depreciation — is characteristic of small commodity economies with concentrated exports, and it recurs.

For a trader the transferable point is about correlation and concentration. A currency whose economy depends on one commodity sold to one buyer is not a diversified macro exposure; it is a leveraged position on that commodity and that buyer's demand, and it will behave accordingly when either turns.

Retail trading

There is no established domestic framework licensing retail leveraged CFD brokers. Residents who trade use foreign firms, and the licensing jurisdiction's rules and compensation arrangements apply entirely. The FRC and the central bank publish warnings about unlicensed financial activity, and Mongolia has seen significant Ponzi and pyramid schemes, some very large relative to the economy.

Practical conditions

Converting tugrik into a dollar account carries a spread in both directions, and card payments to foreign financial merchants are sometimes declined on merchant category.

Cautions

The test that catches most of it: a guaranteed monthly return is not something trading produces, and payment for recruiting others identifies a pyramid regardless of the product named.

Checks

Verify any broker on the register of the regulator that issued its licence.