Evaldo Albuquerque, Editor, Exotic FX Alert
Two months ago, I told Currency Capitalist subscribers how Asian currencies were the new safe-haven currencies.
At that time, the Asian Dollar index, which measures the performance of emerging Asian currencies against the U.S. dollar, was hitting a new all-time high. That was right in the middle of the summer market turmoil.
In fact, Asian currencies were performing so well, that it appeared they would remain immune to the current woes in the U.S. and Europe. As one of the most fiscally sound regions in the world, it seemed Asia would continue to attract capital and push Asian currencies higher.
But just in the past 30 days, everything has changed…
That earlier resilience is gone. Most Asian currencies have been hit hard.
But that just creates a better buying opportunity for these currencies – especially if you’re buying for the long-term. Let me explain…
Asian Currencies Sell-Off Has Nothing
To Do With Asia
The fundamental story of Asian currencies has not changed in any way. What’s happening with these fundamentally sound currencies have little to do with what’s going on in Asia.
It’s all about Europe.
We’re seeing a sharp sell-off in Asian currencies because investors now fear Europe’s debt problems will hurt the entire global economy.
In other words, we’re starting so see contagion of the European crisis to the strongest part of the global economy. Investors are running for cover.
As the bellwether for Asian currencies, the Korean won provides a good example. It’s down 6% so far this month. That’s a big move for currencies.
And Asian Central Banks are not intervening to smooth the movements. Maybe they’re welcoming weaker currencies to boost exports in a world of slower growth.
The Singapore dollar, one of Asia’s strongest currencies, provides another good example. Let’s take a look.
When the Singapore Dollar is Weak,
You Know Something Is Wrong
The Singapore dollar is without a question one of the strongest currencies in the world in terms of fundamentals. So when it’s selling off, you know something major is going on.
You can see the daily chart of the pair USD/SGD (U.S dollar/Singapore dollar) below.
When it moves down, it indicates one U.S. dollar is buying fewer Singapore dollars. In other words, the Singapore dollar is getting stronger. And when it moves up, it’s getting weaker.
The pair just had a major spike higher, crossing above its 200-day moving average (blue line). It has also violated the downtrend line (black line).
These are the first signs the short-term trend is turning bullish for the dollar against the Singapore dollar.
More importantly, this is a sign things are getting really bad out there. The last time the pair USD/SGD significantly crossed above its 200-day moving average was during the 2008 crisis, as you can see in the chart.
U.S. Dollar Had Been Rallying Even Against the
Powerful Singapore Dollar
How to Buy Five Asian Currencies
for Your IRA
As I said, not much has changed in Asia. It remains a region where most countries have much lower levels of debt than developed nations. Asia is where you will still find the major sources of global economic growth in the years to come.
In the long-term, Asian currencies will continue to strengthen against the dollar. That’s why you should use these big dollar rallies to accumulate more Asian currencies, such as the Singapore dollar, on the cheap.
In short, Asian currencies remain the place to park your cash for the 21st century. That’s especially the case if you’re buying for your long-term retirement plan.
If you’re looking for an easy way to upgrade your retirement plan with Asian currencies, you might consider the Asian Currency Portfolio at the U.S.-based bank, EverBank.
This portfolio contains five Asian currencies for a $10,000 minimum investment. And you can invest in it with an Individual Retirement Account (IRA).
You should know that The Sovereign Society is an advertiser of EverBank, so we may receive fees if you choose to invest in their products. However, this Asian Currency Portfolio is worth mentioning regardless because it is one of the easiest ways to invest in Asian currencies here in the U.S
But again, that’s for the long-term. In the short-term, defensive plays will still prevail.
That means the dollar can continue to rally against those currencies. But you can also profit from that by buying the dollar through short-term trades in the spot Forex market.
But looking at the big picture, you should use those rallies to buy strong currencies, such as the Singapore dollar and Korean won, on the cheap. And hold them for the long-term.
Editor, Exotic FX Alert
2 thoughts on “Start Building Your “Anti-Dollar” Retirement Plan With These Extremely Undervalued Currencies”
Although it is true that the sell off in Asia has nothing to do with fundamentals in Asia…however I would argue that it is not just because of eurozone issues.
If eurozone is goes down, Asia will be hit too (in terms of export demand, Foreign investments etc)..and that is probably triggering the sell off….no??
True, the world’s financial markets are so tightly intertwined today that financial problems just about anywhere can have wide and far flung consequences for markets that are geographically distant. I for one feel that Asia is in a far better position to weather any storm. Europe is a low growth zone, Asia is not. Even in the worst case scenario that Europe falters, Asia will find other markets to exports its goods to.
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