What are your views on the future direction of DOLLAR/STERLING?
I have savings in USD which have appreciated a good deal in the past few months in Sterling terms. Will the new US bail out approval result in a plumetting dollar (and the value of my savings with it) or is the UK economy in such bad shape that Sterling will weaken further against the USD?
I am probably going to sell 1/3 of my USD into Sterling soon, and then wait and see where things go.
Any thoughts?
Answers
731 points
thinker70 answered 9 months ago …
I am assuming that you are British (I am writing from Canada) and my perspective is that BOTH the dollar and Sterling are in BIG trouble and the Euro is not far behind. It is never a bad move to diversify and the safest currencies in my opinion are the Swiss Franc, Australian, Singapore, Canadian and Hong Kong dollars! When the world economy begins to recover the commodity based currencies of Australia and Canada are well positioned to strengthen!
The U.S. dollar and the British Pound will BOTH decline in value due to the printing of additional fiat currency by their respective governments for bailout packages which are in reality just adding to the debt burden that dilutes the value of the currency and will foster inflation and loss of purchasing power.
Th current bounce in the U.S. dollar is not due to any fundamental strength that justifies it, just a temporary blip due to unwinding of carry trades and money returning to the premiere world trade currency, The interactions are complex but I see nothing on the horizon that would lead me to believe the dollar can do anything but continue to lose purchasing power at an accelerating rate as trillions of new dollars are created out of thin air, debt piled on debt that is already un-paralleled in history
3943 points
MNSL answered 9 months ago …
I think it is better to avoid commodity currencies as well as Singapore and Hong Kong dollar now. Every body is in big trouble now.
Unemployment is increasing rapidly in countries such as Australia, Singapore, Hong Kong and Dubai etc. Some will have trade deficits sooner than later. We can not expect demand for commodities and assets including houses until economy improve. First of all capital market has to improve. Then economy has to improve. . Finally there will be demand for other products including luxury items.
There is a demand destruction as well as wealth destruction globally. Carry traders are inactive now.
Economic analysts expect property prices come down by more than 35% in above countries.
There are further interest cuts in some countries. Their currencies will go down further.
Surprisingly one top investor likes to invest in British Pound. I think currency market will stagnate for some times. Some currencies will go down further.
We can not select a strong currency at the moment. However as a reserve currency still US dollar has some support.
We will be able to see long term currency direction towards end of this year and beginning of next year. This is not the time to take positions in the currency market.
