Category

Dollar

Question of the Week: Investors Seek Metals To Soften Blow of Global Currency War

The housing market remains in the dumper. U.S. stocks – despite a rally – are still 22% below their record highs of two years ago. And the "official" unemployment rate remains at a heart-stopping 9.6%.

With their knees almost ready to buckle under such burdens already, how will American consumers respond when clothes, computer accessories and other key consumer staples at their neighborhood Wal-Mart Stores Inc. (NYSE: WMT) undergo an overnight price hike of 30% to 60%?

As the United States aims to increase exports by debasing the dollar, a global currency war is underway that could swallow consumers and investors if they don't prepare for the likelihood of a weaker dollar.

The United States, China, Switzerland, Brazil, South Korea, Australia, Japan have all entered the war, trying to bring down their currencies to boost exports and fuel growth. Countries are vying to win the "race to the bottom," as it's been called by Money Morning Contributing Writer Peter Schiff.

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You Heard it Here First: China's Plan to Dethrone the Dollar Continues to Unfold

The U.S. dollar is on the way out as the world's top reserve currency. And as Money Morning Chief Investment Strategist Keith Fitz-Gerald predicted more than a year and a half ago, the yuan could be set to replace it.

The greenback has served as the world's benchmark reserve currency since the mid-20th century, but soaring deficits and the U.S. Federal Reserve's loose monetary policy have drained the dollar's value. Meanwhile, emerging markets – many of which are vibrant manufacturing hubs, net creditors, and have rich caches of commodities – are more fiscally sound than the United States, which has a $1.3 trillion budget deficit.

"If you look at the fundamentals of a lot of these emerging markets, they are considerably better than developed markets," Kenneth Akintewe, a Singapore-based investment manager at Aberdeen Asset Management PLC told Bloomberg in an Oct. 11 interview. "Who wants to be holding U.S. dollars at this stage?"

China, which leads the world with more than $2 trillion in currency reserves held mostly in U.S. Treasuries, is chief among the countries seeking respite from the dollar's decline. Beijing has long bemoaned the depreciation of the dollar, stating outright that it should be replaced as the world's main reserve currency.

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Global Currency Wars: Three Ways to Profit From the "Race to the Bottom"

Short of sitting on the sidelines, investors can't escape the global currency wars – a "race to the bottom" shootout that has countries debasing their currencies to boost overseas sales.

But here's the only thing you need to know: As the central banks of the world slug it out in the global currency markets, individual investors who understand the currency-war strategy can reap some extraordinary gains.

Let's take a look.

For three investments that will let you profit from the "race to the bottom," please read on…

For three investments that will let you profit from the "race to the bottom," please read on...

The Dollar's Unavoidable Day of Reckoning is Here…

The government is printing money 24/7 to paper over the bad debts of the housing crisis and Wall Street bailouts. We're about to enter a cycle of hyper-inflation that will devalue every dollar you own… but there is a way to profit! Find out how in this free report.

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IMF Warns of Slower Growth As Currency War Rages On

Meetings of the Group of Seven (G-7) countries in Washington this week could feature a clash of views that have sparked an international currency war even as the International Monetary Fund (IMF) warned that growth in developed economies is slowing.

The conflict represents a fundamental disagreement about how to sustain the global economic recovery among countries that prefer flexible exchange rates like the United States, and others that are resisting calls to allow its currency to appreciate, like China.

A renewed push for easier monetary policy came as the IMF warned growth in advanced economies is falling short of its forecasts.

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We Want to Hear From You: Are You Prepared for the Global Currency War?

The housing market remains in the dumper. U.S. stocks – despite a rally – are still 22% below their record highs of two years ago. And the "official" unemployment rate remains at a heart-stopping 9.6%.

With their knees almost ready to buckle under such burdens already, how will American consumers respond when clothes, computer accessories or other key consumer staples at their neighborhood Wal-Mart Stores Inc. (NYSE: WMT) undergoes an overnight price hike of 30% to 60%?

As the United States aims to increase exports by debasing the dollar, a global currency war is underway that could swallow consumers and investors if they don't prepare for the likelihood of a weaker dollar.

Read More…

You Heard It Here First: A Global Currency War is Being Fought – And There Will Be No Victors

Brazil's finance minister, Guido Mantega, recently acknowledged to the global investment community what most trade officials already believed: An "international currency war" has broken out.

And, in this war, there won't be a real victor.

"We're in the midst of an international currency war, a general weakening of currency," Mantega told The Financial Times. "This threatens us because it takes away our competitiveness."

Mantega's comments came just weeks after Japan joined Switzerland in intervening in the foreign-exchange market. But the reality is that the currency war has been under way since 2008.

At least, that's when Money Morning Chief Investment Strategist Keith Fitz-Gerald first warned that countries – most notably the United States – would debase their currencies in a race to boost their exports and keep economic growth afloat.

"The government has adopted a weak-dollar policy," Fitz-Gerald said in an interview in March 2008. "They're sending out a message loud and clear: 'We want you to sell the dollar.'"

By holding the central bank's benchmark lending rate down in a record low range of 0.00% to 0.25% for close to two years now and buying up Treasuries in a policy known as "quantitative easing," the U.S. Federal Reserve is effectively debasing the dollar.

But the U.S. central bank isn't alone.

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Seven Ways to Profit From the Worldwide Currency War

If you're like me, and you spend a lot of time perusing financial Web sites in search of the latest global investing news, you've probably started to see a lot of stories about rapid shifts in foreign exchange rates – including some "currency pairs" that have traditionally been rather slow-moving.

Back during the spring, for instance, the news was full of stories about how Switzerland was buying up European euros in an effort to weaken the strong Swiss franc – only to have that country change course and diversify its holdings by purchasing U.S. dollars.

During the summer, we watched as Japan entered the foreign exchange (or "FX") markets for the first time in nearly a decade in order to buy U.S. dollars.

Even South Korea has been a contestant in the currency-transaction arena, with that Asian tiger working to weaken its currency, the won, in an effort to improve its exports. Just yesterday (Monday), the won rose for the sixth-straight day, its longest winning streak in eight weeks, after the nation's foreign-exchange reserves climbed to a record $290 billion.

These events aren't random. But they are related. They're part of a worldwide currency war that's being waged before our eyes – and that will prove very costly to investors who don't recognize the game that's being played. Fortunately, we do – and we're going to tell you all about it.

To find out about those profit plays, please read on…

To find out about those profit plays, please read on...

Currency Exchange Rates and Your Investments: What You Don't Know Can Hurt You

You may be facing immense foreign-currency risks in your investment portfolio – and not even realize it.

If that's the case, don't feel bad: You're not alone.

The reality is that most American investors have no idea that currency exchange rates directly affect U.S. corporate earnings, this country's stock market, or the growth rate of our economy.

The bottom line: These investors don't realize that they face some pretty major foreign-exchange-rate exposure in their investment portfolios – as well as with the individual stocks contained in those portfolios.

This exchange-rate exposure can be accompanied by some pretty major risks. Understanding how currency fluctuations can enhance or destroy corporate earnings, the export sector and the U.S. economy, and even your personal wealth will make you a smarter, better investor.

To understand how the currency markets are determining the fate of our economy, please read on...

Money Morning Mailbag: There's No Way Around the Dangers of Municipal Bonds

Money Morning Contributing Editor Martin Hutchinson last month introduced readers to the dangers of municipal bonds. While many investors assumed munis offered a safe haven in turbulent times, the battered condition of state and local finances has left many munis running the risk of default.

"Brokers will tell you that particular state and municipal bond issues are 'safe,' meaning that they are rated highly by the rating agencies," said Hutchinson. "However, the rating agencies got it wrong on subprime mortgage instruments, and it seems pretty clear that they are getting it wrong on states and municipalities."

On the municipal level, local property taxes are the primary revenue source. Declining home prices and increased mortgage delinquencies are creating a housing market that offers little local revenue. Municipalities are then left struggling to make ends meet.

Hutchinson said the vicious cycle could send municipal-bond defaults soaring past 2009's $6.4 billion.

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