There is a trio of currencies that you must include in your portfolio today because they operate on an entirely different playing field than the U.S. dollar and the euro and, as such, are set to undergo huge revaluations in the coming months. Without further ado… Words: 855
So says Karim Rahemtulla (www.wallstreetdaily.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. (This paragraph must be included in any article re-posting to avoid copyright infringement.)
Rahemtulla goes on to say, in part:
The U.S. dollar and the euro, in addition to being in slow-growth economies, are saddled with debilitating debts and are the victims of an enormous increase in money supply which will result is serious inflation and the devaluation of both currencies in the coming years. [The 3 “super currencies’ are, in no particular order:]
1. The Chinese Yuan
As the dollar and euro decline, the Chinese are busy plowing the yuan into assets that increase in value. Things like mines, factories, other currencies and natural resources.
At current levels, the yuan is a bargain. Of course, the Chinese government deliberately sets the exchange rate artificially low – rather than allowing it to float freely on world markets – in order to profit from Chinese goods and services.
With the world balking at this arrangement, the Chinese will have to revalue the yuan in a big way over the coming years. Why? Two reasons…
- The Chinese aren’t just goods producers these days… they’re big consumers, too. This means reduced dollar reserves and more yuan will be invested abroad.
- The Chinese will be forced to revalue the yuan more frequently and by greater amounts – something the country was unable to do as it was busy accumulating dollars.
As a tandem, these two catalysts will force the value of the yuan higher in the years ahead.
Where to Invest: The FOREX market is fraught with volatility and requires a special account to execute trades. In lieu of that, take advantage through the WisdomTree Chinese Yuan ETF (NYSE: CYB). Hold for the long term – two to five years – and look for 20% upside against the U.S. dollar in five years.
2. The Indian Rupee
Having dropped by more than 20% against the dollar over the past couple of years, the rupee is an absolute steal right now. The Indian Central Bank controls the rupee closely and in an effort to combat the financial crisis and make Indian goods and services more competitive, it’s allowed the currency to depreciate. The result is an artificially weak rupee that will appreciate due to the trend in global growth and money flow.
With Indian GDP growth set to outstrip all Western economies in the years ahead, the country will have to raise interest rates to quell inflation. In the past, this wasn’t an issue, since India wasn’t a global player when it came to importing goods and services. It was a closed, insulated economy, where the majority of the population bought locally, but with the Indian middle class approaching some 400 million people, the country is beginning to import more goods. Such a reality will lead to inflation, which will force the central bank to tighten monetary policy.
Where to Invest: You can buy the Indian rupee through the WisdomTree Indian Rupee ETF (NYSE: ICN). Again, plan to hold for two to five years. I project 25% growth against the U.S. dollar in five years.
3. The Canadian Dollar
The Canadian dollar [or “loonie” as it is called by Canadians because of the loon on the $1 coin] has a bright future. For starters, Canada is rich in natural resources like oil, timber and gold and, as the prospects for global growth pick up, all three [will be] in huge demand from developed and developing economies alike – a trend that will remain for years.
Canada also has its fiscal house in good order. Its AAA credit rating is secure, as the country quickly tackled its debt issues in the early part of this century. As a result, the Canadian dollar has almost doubled against its U.S. counterpart in the past decade.
In addition, Canada didn’t have to bail out its banks or financial system because of lax lending practices. Quite the opposite, in fact. Thanks to their financial strength, Canadian banks are now expanding into the United States in record numbers.
In short, Canada has a lot going for it:
- It supplies emerging markets,
- It has a strong and fiscally responsible financial system and government,
- It will benefit from a U.S. economic recovery and
- It maintains a transparent and trusted economy.
Where to Invest: Add the “loonie” to your portfolio through the CurrencyShares Canadian Dollar Trust (NYSE: FXC). Like the Chinese yuan and Indian rupee, this is a long-term holding, with a further 25% gain against the U.S. dollar in five years.
Remember that we’re talking currencies here, so a move of 10% to 15% would be huge. These three will represent the new world order in the currency market over the coming years – and the gains will reflect that.
Editor’s Note: The above article has been has edited ([ ]), abridged, and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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