Tuesday, 2 July 2013
Where is Cash king?
Following on from yesterday's post about Gold and Precious metals being in the doldrums and comments to the effect that many readers are in cash, I thought, but what cash? Above is the exchange trade weighted data from the BIS.
After all if you are in any one currency you run the risk of runs on that currency and are exposed to exchange rate fluctuations. However since 2007 the world has been an up and down place and I can't imagine too many FX traders have been nailing it in markets where technicals are losing to politicians time after time.
The chart above shows the various key currencies and their real movements over the past 5 years. As you can see one of the worst fallers is the UK pound, which was hugely over-valued in 2007. So bad luck to all those holding pounds.
More tricky is to see where one should be today, although Japan may look like a buying opportunity due to its QE craziness this would be a high risk strategy. Similarly, the euro is underweight but of course there maybe problems here. Singapore was the place to be for the last few years but now appears toppy. Perheps surprisingly the US dollar is also a good candidate at the moment with the Norwegian Kroner.
The UK pound, having been re-rated downwards and suffering another mini-dip last year, is not likely to push on again so this year won't be its worst year in terms of relative depreciation - however, for safety it is still beaten by the USD.