There is a lot of head scratching going on among the few traders I have spoken with this morning. Once again they are trying to pick the winner of an “ugly contest”.
- The USD, with almost zero interest rates, an economy in a serious recession and the prospect of further bank bail-outs or even nationalisation, is not an attractive buy.
- The EUR may, on the outside at least, look slightly better but the overall zonal debt for the banking sector is worse than the US and at least half of the Eurozone countries look headed for depression-like economic numbers. Add in to the mix the political ramifications of all these factors and the EUR starts to look very risky.
- The JPY was the darling of the currency markets up until recent weeks but with it’s economy probably faring the worst of all the major nations, the gloss is starting to wear off very quickly. It is very difficult to justify buying the JPY against any of the other majors at current levels.
- The GBP has lost the most in recent months so there is some argument for being slightly long sterling in your portfolio but you would have to be brave given it’s performance in recent months. The CHF, don’t get me started. This is one “safe-haven” trade which is going to end in floods of tears and horrendous losses.
- What about the AUD? Undervalued still and with significant resources to back it up. Foreign capital is now queueing up trying to buy cheap resource companies. Of all the so-called major currencies, I like the AUD best at current levels, especially on the crosses against the CHF, JPY, and EUR.
