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Do you think following currencies will appreciate or depreciate against US Dollar in next 12 months
British Pound,
New Zealand Dollar,
Australian Dollar
Euro
Yen
Please give valid reasons for your answers. Thanks in advance.
Answers
411 points
jester112358 answered one year ago …
Very tough question. I'm long the Swiss franc and Australian dollar. I'm thinking of adding the Brazilian Rial. Why? The Swiss franc is the next best thing to gold as the Swiss government controls its money supply tightly. (The old supply and demand thing!) Australian and Brazilian interest rates at 5% and almost 11% should attract a lot of capital. However, currency speculation is not for amateurs as market manipulation by central banks is rampant-hence the temporarily pause in the inevitable drop of the dollar. In the long run only current account balance (public and trade deficits) and interest rates should matter. Thus, the strongest currencies are in booming economies like Brazil and Australia. I speculate the mid-east countries will drop their peg to the dollar and opt for a market basket of currencies, which will lead to a major loss in dollar value above that to be expected anyway due to our low interest rates and huge account deficit.
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312 points
MoresbyChief answered one year ago …
I am not a currency expert by any means. However I do think that the USD has been oversold. As I understand it two main things have been driving the sell off - widening trade deficit & lowering interest rates (resulting in carry trades).
The Fed is unlikely to cut interest rates further, and may have to increase later this year to combat inflation. Therefore interest rate differentials will reduce. In addition the Fed may be raising rates just as the ECB and BOE are having to cut further - they have been slower to cut as they are more concerned about inflation, but this may change as the housing slump (esp in UK, Spain, Ireland) really starts to bite.
Therefore I definitely think that the USD will appreciate against the Pound (it has started to already) and will probably do the same against the Euro, which looks too expensive at the moment, and has come down a bit from its peak.
With the USD so cheap, this has spurred US exports, reducing the trade deficit. Not sure if this then suggests another spur for the USD to strengthen.
As for Australia, this currency is being fuelled by the commodities boom and a large inflow of capital. The boom and current low levels of unemployment is also putting significant upward pressure on wages, fuelling inflation. Therefore Australia is likely to keep interest rates high (and perhaps continue to increase them) in order to combat inflation, suggesting the AUD will stay strong against the USD.
825 points
Dragonsbane answered one year ago …
First off, I think currency trading is very hard and wouldn't recommend it to anyone. There are a lot of easier ways to make money than by trading currencies. With that preface out of the way, I'll begin...
Personally, I think the USD may have another 5% of upside against other currencies (in the DXY). But I think any rally in the USD will be short lived due to structural issues with the USD and in the United States. I'll elaborate and then I'll give my views on the currencies.
I'm bearish on the US economy, hard commodities in the short term (1-2 yrs). Having said that, I'm convinced the Fed isn't done cutting regardless of what Bernanke or OISs say. When recession hits, the Fed will cut. They always have and they always will (and I'm a firm believer in the fact that actions speak louder than words). I'm going to give a longer term view on the currencies, because short term views require entry levels, SLs and TPs. All of which could change in short order on news.
Over the next 3 years:
I like JPY higher due to it's low levels (on a trade weighted basis) and as a hedge to increased risk aversion.
I like EUR higher because it is the "go to" currency when people sell USD.
I like CNY much higher because China will eventually be forced to float this currency to combat inflation. And if this currency does come off significantly after the Olympics, buy it.
I like AUD higher, but would wait until ALL commodities start to fall (short term correction in a long term bull market) before buying this. BTW - When commodities start to fall, AUD could easily collapse 5-15% in a few months.
I have no view on NZD.
And I think GBP goes lower due to higher inflation in the UK (that will make the recession that much worse), the recession that is coming their way and a housing market that is going to make the correction in the US housing market look very minor over the next few years.
Just a reminder - these are Long Term positions, so you'd need deep pockets and wide stops.
Cheers,
dB
