Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Three Must-Own Currencies of 2012

Currencies / Forex Trading Dec 07, 2011 - 06:23 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleMartin Hutchinson writes: If 2011 taught us one thing, it's that currency investing can be a dangerous business.

For instance, the euro - the simplest of hedges against a declining dollar and the U.S. Federal Reserve's expansive monetary policy - has run into difficulties, losing billions for even the most sophisticated Wall Street banks.

But that's not all. The Brazilian real, which was one of the best performing currencies of 2010, has dropped back sharply in 2011.

Still, if you harness the lessons of 2011, you can take advantage of the new opportunities set to emerge in 2012. In particular there are three currencies every investor should own.

I'll get to those in a moment. But first, I'd like to fill you in on what currencies to avoid.

This is just as important - maybe even more so.

Currency Traps
Obviously, the euro is not to be trusted. If its problems were confined to Greece and Portugal, they would be surmountable.

But they're not.

The extension of problems to Italy and Spain, which are both too large to bail out, makes the Eurozone liable to explode, split in two, or simply witness a mass default of several of its countries and much of its banking system.

Certain individual European shares may be a good buy. And German government bonds may be a good buy, since the German currency would explode upwards if the euro split.

But the euro itself? No thanks.

The Japanese yen isn't safe either.

Unlike most other currencies, the yen has risen more than 50% against the U.S. dollar since 2007 and is up another 6% since the beginning of 2011. In short, it has done what President Obama would like China's yuan to do.

Needless to say, Japanese exporters are suffering at these levels, and the country's government debt, over 200% of gross domestic product (GDP) and all denominated in an appreciating yen, has become a serious worry. While the yen could rise further, it must be regarded as very unsafe.

The pound sterling is equally unsafe, but for different reasons.

The British government is running a budget deficit as large as that of the United States, while the British economy is highly dependent on the very unstable and overblown financial services sector.

The pound has some upward potential, and Britain's balance of payments deficit is currently modest, but the Bank of England (BOE) has announced a $430 billion (275 billion pounds) "quantitative easing" program - equivalent to a $2 trillion program here in the United States. So if the United States gets in trouble, Britain is likely to be in even more trouble.

The Australian dollar and Swiss Franc both have safe haven potential, but both currencies ran up a long way in 2011 and the Swiss National bank is determined to print money in order to stop its rise against the euro.

Avoiding these currencies is the first step toward a profitable 2012. The second step is to load up on the currencies that will weather any potential economic downturn and soar should the global economy recover.

Three Must-Own Currencies
To that end, the three must-have currencies of 2012 are as follows:

1.The Canadian Dollar (CAD): Canada is a close neighbor, but distinguished from the United States in having a sound banking system, a much smaller budget deficit, and huge energy and mineral wealth. The Canadian dollar had risen as high as $1.06 in the early part of 2011, but has since drifted back down to about 98 cents. At that level, it has further to rise and is an excellent hedge against any severe problems in the U.S. economy.

2.The Chilean Peso (CLP): Like the Canadian dollar, the Chilean peso benefits from rising resource prices. Better still, Chile is by far the best-run country in Latin America, with a Transparency International Corruption Perceptions Index rating better than that of the United States. The next election is not until December 2013, so political stability is assured. The peso has fallen about 8% this year on fears about emerging markets, but Chile's current account deficit is less than 1% of GDP. It has virtually no government debt and a large trust fund to cushion against shocks (such as last year's earthquake, for example).

3.The South Korean Won (KRW): The won is a hedge against problems in the United States, but also against a collapse in commodity prices. Contrary to the Japanese yen, the won has fallen about 20% against the dollar since 2007, and is flat on the year. However, even with high commodity prices, Korea runs a substantial current account surplus. It also runs a budget surplus with the lowest amount of government spending in the Organization of Economic Cooperation and Development (OECD) group of rich nations.

So it is fabulously strong economically. The only potential weakness comes in the form of an election next April, but even the opposition in Korea is thoroughly pro-market and should cause few problems.

So there you have it. These are the three currencies investors must own in 2012. Stick with them and avoid the likes of the dollar, euro, yen, and pound. If you do, you'll be set for a far more rewarding year in 2012.

Editor's Note: This special report on currency investing is part of Money Morning's annual "Outlook" series, which forecasts the prospects for stocks, commodities, and other top profit opportunities in the New Year. Our last forecast focused on the U.S. economy.]

Source :

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in