With the forex markets focused on risk aversion, will not be long before the favorites of poor performance as the dollar, the yen and the franc to become overvalued. Here are three exotic currencies, you should consider buying when your favorite pair begin to lose strength …
Singapore Dollar (SGD)
FlagThe Singapore, the Singapore dollar has been flying on the charts for the past two months, and no, not because the country has just opened a Universal Studios theme park. Since the fall of Lehman Brothers in 2008, the Singapore dollar has risen 11% against the dollar 14% against the euro and 25% against the pound.
As good as their recent gains, I think the currency still has much room to rise. On the one hand, Finance Minister of Singapore, Tharman Shanmugaratnam sounded hawkish when he talked about inflationary pressures for a couple of days.
The Thar, the man believed to allow the Singapore dollar will help to appreciate the rising prices of battle, especially when the inflation rate in Mexico and climbed at a pace faster than expected and even peaked two years in January.
Of course, you can not talk of inflation let alone growth. The Thar-man also revealed that exports, the primary sources of economic growth in Singapore last year were much better than what the government and the markets expected.
This means that a strong currency, has not adversely affected economic growth, giving the Monetary Authority of Singapore (MAS), there is no reason to launch currency interventions in the short term.
Indian Rupee (IDR)
India FlagAnother Asian currency you should consider buying is the Indian rupee. Although India is only ranked eleventh among the world’s economies with a high nominal GDP, industrial production figures could give China, the current economy second, a run for their money.
During the beginning of the year alone, India’s industrial production increased by one year to the tune of 3.7% over the previous year, on top of the jump of 2.5% in December 2010. Oh, and did I mention that its economy expanded by 8.2% during the third quarter of this year? The major economies can only dream of growing a lot.
Let me share with you a little secret … Now may be the best time to buy the rupee against the U.S. dollar. Since it has moved a bit lower lately, it’s a little cheaper than the Singapore dollar and could be a very good business for you all!
If you are concerned that it could fall further in value, I’ll give you one good reason why you probably do not – a rise in interest rates possible. You see, the rise in inflation could lead to India’s central bank to raise interest rates by 0.25% during its policy meeting this week. If they do, who had scored his eighth interest rate increase over the past 12 months. And you know how rate increases could be delicious as Curry’s currency!.
Brazilian Real (BRL)
Brazil has implemented a series already impressive interventions to prevent the real appreciation: the direct purchase dollars in the spot currency market, a tax on foreign investment, and increased reserve requirements on the currency positions of banks (similar to what China has done).
But even with all that, the Brazilian real important managed to break the 1.65 level against the dollar last week reached its highest level since August 2008. In percentage terms, the Brazilian real has jumped by 38% against the U.S. dollar.
Now, the government is trying to find newer ways to counter the appreciation of the real … but really, what can you do? After all, if large economies such as Switzerland and Japan have failed to curb the profits of their currencies on their own, what chance is Brazil?
Another reason why the real draw is its high interest rate expectations. Inflation in Brazil has increased to more than 6% in February, indicating that more rate hikes by the central bank are possible. After five rate increases since April last year, the benchmark interest rate now stands at 11.75%.
In contrast, interest rates in the U.S., UK, Japan and the euro area are only 1%. The government may try to weaken the real all they want, but high interest rates are so attractive to investors. The real fall one day … but only to lift the next two!.
