The USD broke through the 1.20 barrier briefly yesterday, before recovering to close slightly above 1.20.
The fall in the USD has been relentless as it was trading at around the 1.30 level at the start of the year.
Those who have invested into USD denominated assets would have to earn a return that is in excess of this currency depreciation before they can see any return on their money.
The currencies market tend to be a very long term trending market in nature with bouts of short term volatility. Trying to bet against a long term trend can be quite sucidal, as losses will pile up higher and higher.
This applies especially to those who have bought into certain currencies at a higher price and want to wait for a pullback into their purchase price before they sell their currencies.
Remember, that day might never come. Just look at the 30-year chart price chart of GBP/SGD as one good example.
5 comments
James says:
July 29, 2011 at 11:52 am (UTC 8)
When US$ is no longer an acceptable world currency, US$ = $0, but hard assets are hard assets, which will be revalued in new world currency ( China Yuan or Gold ? ).
Martin Lee says:
August 7, 2011 at 7:45 am (UTC 8)
Dear James,
The EUR could have been an alternative but since it is also facing a lot of uncertainty, there appears to be nothing suitable yet.
Jason says:
July 29, 2011 at 1:45 pm (UTC 8)
Currently, all the commodities are still priced in USD.
So, what is the best way to hedge? FX Options? or Spot Forex? Fuutres or Forward Markets? Which is suitable for retail investors?
Any suggestion from the gurus?
Nathan Kadair says:
August 1, 2011 at 9:46 pm (UTC 8)
Gold. No two ways about it
Martin Lee says:
August 7, 2011 at 7:43 am (UTC 8)
Dear Jason,
Spot forex would be the most straight forward. But have to make sure it is really for the purpose of hedging and not a pure directional play.