Our International Investment & Business
Course last weekend looked at many reasons why the US dollar
One reason is the talk that Russia will
make the ruble “internationally convertible” so
that it could be used in oil and natural gas transactions.
Presently, oil is denominated exclusively in dollars and
sold through the New York Mercantile Exchange (NYMX) or the
London Petroleum Exchange (LPE) both owned by American investors.
If Russia proceeds with this plan, it will add to the many
streams that are eroding the greenback.
More importantly the course reviewed options
of where to invest for protection against a dollar collapse.
One positive alternative are the “other” dollars:
Canadian, New Zealand and Australian.
The Canadian dollar (CAD) is very strong.
We looked at why in a recent message. To
see an update.
Jyske Bank just wrote: “CAD – hard
to live without. At the moment, the appreciation of CAD,
especially against USD, appears to be never ending. In addition
to the already mentioned positive factors such as excellent
economic indicators, the string of interest-rate hikes, Canada’s
attractive status as a commodities nation, there is another
new dimension, namely a general dollar aversion. An aversion
which is threatening to turn into an actual dollar phobia.
If that happens, CAD will be even more attractive for international
investors who have initiated a hectic search for currencies
which offer an economic scenario completely opposite of that
of the US at the moment.
“And consequently, the love affair
between the market participants and the Canadian dollar looks
set to continue unabatedly. However, it is worth keeping
an eye on the Canadian central bank with David Dodge at the
helm. Recently, he has cautiously aired his concern about
a speculative demand for CAD. Although in our view, the danger
of a true dollar collapse is higher than the danger of intervention
from the Canadian central bank.”
The downside in the Canadian dollar is that
you have to pay a percent or so to hold Canadian bonds at
this time due to the lowered interest rates. (See the bond
The New Zealand dollar has been through
a crash. Now may be good to buy and hold the Kiwi.
There are still problems with the Kiwi currency
- no doubt. The country has a huge current account imbalance,
almost 9% of GDP. Traders are shy because they have been
burned since the beginning of the year, and the economy is
However because New Zealand has a small
population and economy, deficits can easily reverse with
only a small amount of international interest. The US on
the other hand has a huge deficit that is not as easy to
reverse. More and more readers tell me they moving to New
Zealand. This interest in moving there by Americans and British,
fed up with their own nations, could have a huge impact in
reducing the current account deficit.
In addition New Zealand’s economy
has slowed, almost to recession. In currency terms, right
now this is good. The sluggish economy will slow inflation
and reduce imports that feed NZ’s trade deficit.
Mainly the Kiwi is looking ready for a recovery
because it has fallen so much.
These dollars are connected. History shows
that when the US dollar falls so too do the Canadian, Australian
and NZ dollar. The NZ dollar has taken its hit, perhaps too
much and may turn around. Though it may still sag a little
in the short term, this currency has potential to rise long
term versus the greenback.
Jyske Bank agrees and says “In 2006,
the NZD/USD ride has been a doubtful pleasure. First like
a tornado, then a direct spin towards the ground. Nevertheless,
we recommend investors to get in again or hold on to existing
long positions and stay belted up.”
Finally, the Australian dollar is advancing
against the U.S. dollar as well.
The Aussie's rise has coincided with a recovery
in commodities and a decline in risk aversion. Recent reports
show that the Australian trade deficit narrowed more than
expected to A$1.09 billion in April.
Also inflation is near the top end of the
2-3 percent target band. This increases the odds of higher
AUD interest rate which would protect the Aussie's yield
advantage over other major currencies. Currently investors
gain a slight interest lift in the Australian dollar versus
the greenback. Here are some current yields on bonds denominated
in the various dollars.
20-05-2009 Ericsson LM Tel
|| 13-02-2013 Hutch Wham Intl
|| 22-07-2008 Deutsche Tel
|| 16-07-2010 BK Ned Gemeeten
|| 25-01-2011 CIE Fin Foncier
|| 01-03-2008 NSWTC-Intl-Regd
|| 18-07-2012 Eurofima
|| 22-05-2008 Gen Elec Cap Crp
08-02-2008 ABN Amro Bnk
||15-07-2009 Europe Invt Bank
||20-07-2015 Instit Credt Ofcl
Deciding to get out of the US dollar is
quite easy compared to knowing where to go! Some emerging
market investments make a great deal of sense.. European
currencies offer some stability but pay much lower fixed
returns right now. The other dollars (AUD, CAD and NZD) are
in the middle…a bit riskier than Europe, but less
volatile than emerging. They pay more than Europe but less
than emerging. These dollars make sense be added to a diversification
Enhance your profit potential with a diversified
portfolio of emerging currencies through a MultiCurrency
Learn about investing in emerging
currencies, gold, silver, Ecuador, import-export, overseas
markets and more. Join Merri and me at our September 15-16-17,
2006 International Business and Investing Made EZ course
in North Carolina. Review where to invest and do business
now and learn which markets and currencies may be strong
in the year ahead. Our May course was overbooked and the
September session is already filling up fast. Our free
accommodations are reserved on a first come first served
basis so do not delay! DETAILS