September 23, 2010 – Emerging Market Currencies Are on Fire

Featured Trades: (EMERGING MARKET CURRECIES), (FXC), (FXA)
Currency Shares Canadian Dollar Trust ETF
Currency Shares Australian Dollar Trust ETF


4) Emerging Market Currencies Are on Fire. If you think that emerging stock markets have been hot this year, take a look at their currencies, which are all blasting through to new all time highs. The Malaysian ringgit is up 11.1% against the buck this year, the Thai baht has appreciated by 8.9%, and the Singapore dollar has jumped by 6.8%.

The central banks of these countries have tried to stem the inflows to maintain export competitiveness, as Japan has done, to no avail. The ocean of money pouring in from the big hedge funds has just been too great. Friends who are using 5X leverage modest for the foreign exchange market are reporting windfall returns.

For me, this move was a no brainer to see coming, as internationally strong economies are the basis, not only for bull markets in equities, but virile currencies as well (click here for ‘Time to Play the Minor Asian Currencies’). Unfortunately, there are no dedicated currency ETF’s for these relatively illiquid currencies, as there thankfully are for the Canadian (FXC) and Australian (FXA) dollars. At least not yet, anyway.

The great thing for the investors in these countries, like Singapore (EWS) (click here for ‘Singapore Sizzles’ ), and Thailand (TF) (click here for that call) is that this creates a double leveraged effect on profits. Rising foreign shares are worth even more when their currencies are increasing in value too.

Even the Chinese Yuan (renminbi) has been strong, with the People’s Bank of China kicking and screaming all the way. Concerns about a generalized dollar collapse have driven the ETF (CYB) up 2% this month. Like everything else in the emerging world, these currencies are overbought for the short term, but should continue to power on for another decade.

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Hey Baby, Can You Spare a Baht?

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