Going soft on hard currencies

… Asian, European markets tank overnight; US stock futures lower on Greece concerns;  IKEA cutting prices…

So that’s the dollar, the Euro, and the franc we’re not parking in. The loonie is sinking too.

Where oh where are we to put our hard earned shekels?

What about the world’s ‘other’ currencies?

We’re told to avoid the Mexican peso, the Thai baht, the Brazilian real –  all the other so-called tissue paper money. But maybe that’s upside down too, along with everything else. For example, the Brazilian real and the Colombian and Chilean pesos only showed an exchange rate variance to the US dollar of between 0.9 % and 0.95 % in the past six months. Pretty stable if you ask me. And look at their growth in GDP — projected to be in the neighbourhood of 4% to 5% this year. In this race to the bottom among the G7 nations, the world’s soft currencies are destined to lose, which means we’ll see the aforementioned pesos skyrocketing. In fact, we already are.  Since 2009 the Chilean peso has appreciated by approximately 30 percent! Forget the dollar!  I’m buying obscure, multicoloured paper money from the remote corners of the world, Malaysian ringgitts maybe. See? I don’t even know how to spell it!

Seriously, what’s wrong with setting up accounts in foreign lands in local money? You’re not supposed to; you’re supposed to have a USD denominated account, A hard currency. But what’s the sense in that? If you buy domestic stocks in Chile in local currency, your profits get returned in pesos, so you have a bit of a hedge there; and you can throw those into a so-called UF (as in ‘oof’) savings account offered by Banco Chile, which is basically a dollar/peso pair that acts like a cost-averaged mutual fund. It smooths out all the short term fluctuations in the exchange rate with the dollar.

I’m no expert on personal finance so you can take from that what you will. What I do know is the emerging markets of the world and the G7 are involved in the most stunning reversal of fortunes in living memory, with decent GDP growth in the former and next to none in Europe and the United States going into the final quarter of 2011. The point – now is the time to be creative and think outside the box.

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