Global Currency

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...

Controversial House China Tariff Bill Will Take America Down the Wrong Road

The U.S. House of Representatives this week overwhelmingly passed a bill that would enable the Obama administration to impose punitive tariffs on almost all Chinese imports into the United States - a controversial move that's intended to punish China for refusing to revalue its currency.

The House China tariff bill faces opposition in the Senate and from the Obama administration and isn't expected to become law. Let's hope that reluctance continues to hold: This bill is little more than a political con job and is quite possibly the stupidest thing that Washington could do right now.

Not only will this touch off a war the United States literally cannot afford to fight, but it's going to hamstring millions of already cash tight Americans by raising the cost of living dramatically while further eviscerating our already fragile gross domestic product (GDP).

Let me show you why...



To understand the hidden costs of the China tariff bill, please read on...

Money Morning Mailbag: Don't Bank on a Return to the Gold Standard

Gold prices closed above $1,300 an ounce for the third straight day yesterday (Thursday), continuing a record run that's delighted gold bugs everywhere.

The surge shows just how much confidence investors have lost in fiat money, and greater appreciation for what former U.S. Federal Reserve Chairman Alan Greenspan last month called the "ultimate means of payment."

Gold's price surge "is a signal that there is a problem with respect to currency markets globally," Greenspan told the Council on Foreign Relations.

Indeed, Money Morning has repeatedly warned readers about the pitfalls of paper currency. However, it's unlikely that readers hoping for a return to the gold standard will get their wish.

Read More…

Exchange-Rate Risk: The Unseen Enemy of U.S. Investors

When specialty-chemicals-maker H.B. Fuller Co. (NYSE: FUL) announced its third-quarter results earlier this month - with earnings and revenue coming in well below expectations - company shareholders suffered an 8% haircut in a single day.

Rising raw material costs appeared to be the headline reason for turbulence at the company. But there was another culprit - a frequent flier in cases of earnings shortfalls, but one that often remains unseen and misunderstood.

I'm talking about exchange-rate risk.

U.S. investors don't realize it yet, but the level of exposure to exchange-rate fluctuations facing big American companies - as well as those based overseas - is steadily increasing. So what happened to H.B. Fuller - and its shareholders - is going to occur with increasing frequency. And in many cases, the fallout will be much more severe.

To better understand the rising exchange-rate risks facing U.S. investors, 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...

Japan's Move To Push Down Yen Gives Its Exporters a Boost Against Global Rivals

Japan yesterday (Wednesday) intervened in the currency market for the first time since 2004 to weaken a surging yen that reached a 15-year high against the U.S. dollar - and the government intervention is expected to continue.

The Japanese yen hit 82.88 against the dollar, alarming the country's officials who are worried that the rising currency would cut into exporters' profits. The yen had risen more than 11% since mid-May.

"We can't overlook these movements that could have a negative effect on the stability of the economy," Finance Minister Yoshihiko Noda said Wednesday. "We will continue to watch developments in the market carefully and we will take bold actions including further intervention if necessary."

Read More…

The Case for the Yuan: Why China's Currency Isn't the Problem Policymakers Make it Out to Be

By allowing the yuan to appreciate, China at least temporarily placated foreign trade partners that had expressed concern about the currency's value. However, the decision has done little to quell criticism from many U.S. policymakers and trade groups who are angry that the Obama administration refuses to brand China a "currency manipulator."

Still, while the yuan does need to appreciate, critics in the United States should remember that the dollar too is flawed, and that the uneven relationship between the two currencies has often worked to America's advantage.

Treasury Secretary Timothy Geithner has thrice declined to tag China as a currency manipulator in his biannual report to Congress. Geithner even delayed the release of the most recent report to give China more time to adjust its policy. That move paid off in June when just days ahead of the Group of 20 (G20) leaders' summit in Toronto, Beijing announced that it would allow the yuan to appreciate against the dollar. Since then, the currency has risen about 1% against the greenback.

Geithner, who made two visits to China in the spring for closed-door talks with top officials on the issue, called the policy shift a "significant step" in his report, but said the yuan remains "undervalued."

What matters now is "how far and how fast the renminbi [or yuan] appreciates," Geithner said, adding that the United States "will closely and regularly monitor the appreciation" of the currency.

Read More…

Money Morning Mid-Year Forecast: India is on the Path to Double-Digit Growth

If it's able to control inflation and cut its debt, India could well become the world's most appealing investment opportunity.

Europe is choking on debt and scrambling to salvage its beleaguered currency. The United States is saddled by high unemployment and struggling to preserve its wobbly recovery. Even China - which has had to reign in its stimulus to cool its red-hot property market and curb inflation - may have peaked.

Yet India's gross domestic product (GDP) is shooting sharply higher, and many economists think economic growth in the subcontinent is about surge into the double-digits for the first time ever.

Read More…

Commodities Are Key as China Continues to Call the Shots

China ended up being the big story this month, as investors looked past Europe to the Far East for clues about what shape the global recovery - if you can even call it that - is taking.

Markets around the globe tanked yesterday (Tuesday) after the Conference Board revised its leading economic index for China to show the smallest gain in five months in April. The index rose just 0.3% in April, which was a significant reduction from the 1.7% gain the Board reported on June 19.

The news of the error contributed to the biggest sell-off in Chinese stocks in more than a month, and sent U.S. indices into a dizzying downward spiral. The Dow Jones Industrial Average plunged 268.22 points, or 2.65%, to close at 9,870.30 and the Standard & Poor's 500 Index tumbled 33.33 points, or 3.10%, to close at 1,041.24.

Read More…

From Leader to Laggard: Is it Time to Bet Against the U.S. Dollar?

The U.S. dollar has been one of the world's strongest currencies in the first part of 2010, posting double-digit gains through the end of May.

And little wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.

In short, it appears that "everybody" knows the greenback is the best choice for safety, quality and security.

But is that really the case? To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.

To see why the dollar could roll over - and to see how to play it - please read on ...

Read More…

Does the EU Bailout Signal the Euro's Demise?

Does the European Union (EU) bailout signal an end for the euro currency?

Investment icon Jim Rogers and lauded economist Nouriel Roubini think so.

And they may be right.

Eurozone governments were forced to spring into action on Sunday to defend the besieged euro. The currency has come under tremendous pressure as investors wonder if Greece's fiscal crisis will spread to other heavily indebted nations.

Greece's deficit-to-gross domestic product (GDP) ratio is a staggering 13.6%, but Greece is No. 2 on the list of over-spenders. No. 1 is Ireland, whose deficit-to-GDP ratio is 14.3%. Spain comes in third at 11.2%; and Portugal is fourth at 9.4%.

The euro in the past six months has dropped by about 17% against the dollar, as investors rushed to ditch the currency.

Read More…

Taipan Daily: Trillion Shmillion – Europe's "Common Currency" Is Still Doomed

As far as the euro goes, the trillion-dollar "shock and awe" program was a shocking disappointment. Here's why.

"... while Europeans no longer fear foreign armies, they are starting to fear foreign bondholders. Europe's existence as a "lifestyle superpower' has depended on an ample supply of credit... "
- Gideon Rachman, Financial Times

"...this is just another example of a short-term, leveraged solution, that merely adds to the burden of future problems..."
- Marc Ostwald, Monument Securities

Read More…

The Greek Debt Crisis Will Slow the Yuan's Advance

Poor Tim Geithner.

Pushed by angry U.S. legislators anxious to brand China as a "currency manipulator," the U.S. Treasury secretary tried to strong-arm China into revaluing the yuan - all because of an assumption that the Asian giant wasn't allowing its currency to appreciate.

Unfortunately for Geithner, those efforts were stymied by a flood of data that actually demonstrates that China's currency has significantly appreciated against the already-wheezing greenback.

To find why China should not revalue the yuan, please read on...