As we head into an uncertain 2013, here are some of my currency calls. Obviously, time will be the judge.
1. US: Near-zero interest rates will continue to drive the Dow Jones and Nasdaq composite higher over the next few months. Short term - a correction of 5 to 10% is inevitable. VIX at all-time lows, due for upward movement. But over the medium term, market is due for a significant correction, depending upon whether the Fed adopts a strong dollar policy or not. if the dollar continues to weaken, as expected, then it may be a more agonizing correction, given that MNC earnings will look better than they really are. Nett ofit, ride the maret- for now- with your fingers on the parachute button.
2. Eurozone - youa re right. Honeymoon until German elections. Thereafter? Anyone's call.
3. British Pound -Terminal decline. Best avoided. The economy is in deep s**t.
4. Japanese yen - will be the dark horse on the way down, and will pull Asia along with it. Already this year, the USD-JPY has moved from 78 to almost 95 now, a pull back of almost 25%. Daryl Guppy is predicting the Yen to settle at 130, by the year end. While that may do well for the Japanese yen, that will also trigger a currency devaluation war in Asia, with the likes of Korea, China, Taiwan, Singapore, Hongkong joining in - since these are all export-oriented economies. This will mean pull out by the ETFs and IRAs of the world back into "less risky" asset class, at last for the short to medium term. If this indeed happens, I think smaller Asian economies are in for some trouble. The likes of Hong Kong and Singapore may then see strong property price corrections, which could be disastrous.
5. Australian Dollar - will be viewed as a "safe haven currency" and so may not lose much, for now. However, being too dependent on selling it's miningware to China, I think the fundamentals are weak for the medium. I am, incidentally, exposed heavily to the AUD.
6. Canadian Dollar - will have the NAFTA effect, and any decline in USD will temporarily pull the CAD down too. Remember that most manufacturing for US in the North American continent now happens across the great lakes and so it is in Canada's exports interest to keep the currency on par with the greenback.
7. The Swiss Franc (CHF) could be the only real 'safe haven" currency. This is also indicated by the very low interest yield on it.
8. I have only talked about the major currencies here and have ignored the likes of the Kroner, the Rand, the Real etc for now.
9. Indian Rupee - until the Fiscal deficit is reined in, I do not see the fundamentals changing. And given that elections are looming around the corner, unfortunately, that is not going to happen anytime soon, notwithstanding the "selling of family jewels" in the form of PSU stake dilution.
10 Gold - if the Greenabck leads the world into economic crisis, then i think for the short term, the value of gold may actually dip, before regaining it's upwards momentum. How much high can it go? Anyone's guess. The central banks of the likes of China, India and even Norway are hoarding gold at every dip, and that may lead to strong demand for the yellow metal.
These are my calls for the short to medium term only. Long term - too volatile to predict right now, but I think the likes of the INR, RMB, CHF, CAD, AUD will do well.
As for the individuals, if one has the opportunity to get exposed to multiple currencies, then he/ she should do it, for the purposes of hedging.
1. US: Near-zero interest rates will continue to drive the Dow Jones and Nasdaq composite higher over the next few months. Short term - a correction of 5 to 10% is inevitable. VIX at all-time lows, due for upward movement. But over the medium term, market is due for a significant correction, depending upon whether the Fed adopts a strong dollar policy or not. if the dollar continues to weaken, as expected, then it may be a more agonizing correction, given that MNC earnings will look better than they really are. Nett ofit, ride the maret- for now- with your fingers on the parachute button.
2. Eurozone - youa re right. Honeymoon until German elections. Thereafter? Anyone's call.
3. British Pound -Terminal decline. Best avoided. The economy is in deep s**t.
4. Japanese yen - will be the dark horse on the way down, and will pull Asia along with it. Already this year, the USD-JPY has moved from 78 to almost 95 now, a pull back of almost 25%. Daryl Guppy is predicting the Yen to settle at 130, by the year end. While that may do well for the Japanese yen, that will also trigger a currency devaluation war in Asia, with the likes of Korea, China, Taiwan, Singapore, Hongkong joining in - since these are all export-oriented economies. This will mean pull out by the ETFs and IRAs of the world back into "less risky" asset class, at last for the short to medium term. If this indeed happens, I think smaller Asian economies are in for some trouble. The likes of Hong Kong and Singapore may then see strong property price corrections, which could be disastrous.
5. Australian Dollar - will be viewed as a "safe haven currency" and so may not lose much, for now. However, being too dependent on selling it's miningware to China, I think the fundamentals are weak for the medium. I am, incidentally, exposed heavily to the AUD.
6. Canadian Dollar - will have the NAFTA effect, and any decline in USD will temporarily pull the CAD down too. Remember that most manufacturing for US in the North American continent now happens across the great lakes and so it is in Canada's exports interest to keep the currency on par with the greenback.
7. The Swiss Franc (CHF) could be the only real 'safe haven" currency. This is also indicated by the very low interest yield on it.
8. I have only talked about the major currencies here and have ignored the likes of the Kroner, the Rand, the Real etc for now.
9. Indian Rupee - until the Fiscal deficit is reined in, I do not see the fundamentals changing. And given that elections are looming around the corner, unfortunately, that is not going to happen anytime soon, notwithstanding the "selling of family jewels" in the form of PSU stake dilution.
10 Gold - if the Greenabck leads the world into economic crisis, then i think for the short term, the value of gold may actually dip, before regaining it's upwards momentum. How much high can it go? Anyone's guess. The central banks of the likes of China, India and even Norway are hoarding gold at every dip, and that may lead to strong demand for the yellow metal.
These are my calls for the short to medium term only. Long term - too volatile to predict right now, but I think the likes of the INR, RMB, CHF, CAD, AUD will do well.
As for the individuals, if one has the opportunity to get exposed to multiple currencies, then he/ she should do it, for the purposes of hedging.
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