Political Unrest Resurfaces, Presses Down on Most Currencies
02/18/2011 0 comments
After a week when the initial resolution of unrest in Egypt reduced uncertainty and safe currencies dropped back, the new unrest in Bahrain has investors going back to their safe havens.
Most currencies dropped in the light of the increasing tension in the Middle East although there were a couple of exceptions.
We anticipate that this status will remain in place until we see how widespread and effective the current series of demonstrations against hard line governments turns out to be.
| Assets Class | Symbols | 02/16 Trend Score | 02/09 Trend Score | Direction |
|---|---|---|---|---|
| Swedish Krona | FXS | 7.42% | 7.54% | v |
| Australia Dollar | FXA | 5.91% | 6.98% | v |
| Swiss Franc | FXF | 4.65% | 4.38% | ^ |
| Canadian Dollar | FXC | 3.26% | 2.25% | ^ |
| Mexican Peso | FXM | 3.14% | 3.64% | v |
| G10 Carry Trade | DBV | 2.5% | 2.64% | v |
| US Dollar Bearish | UDN | 1.81% | 2.43% | v |
| British Pound | FXB | 1.42% | 1.41% | ^ |
| Japanese Yen | FXY | 1.36% | 2.35% | v |
| Euro | FXE | 0.99% | 2.01% | v |
| Chinese Yuan | CYB | 0.46% | 0.32% | ^ |
| Brazilian Real | BZF | -0.55% | 0.17% | v |
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
The Swedish Krona remains at the top of the pile. Sweden have announced interest rate rises and appear comfortable with what that will mean for the currency. Despite that, and the fact that Sweden is something of a safe haven, the currency dropped back a little after the interest rate announcement. It's hard to say whether this was a function of political unrest or the interest rate hike being priced in before hand. The Brazilian Real dropped back as it is influenced by its major trading partners. However, with rising commodity prices and the government focused on cutting government spending, there is an expectation that it will start to rise.
The Australian Dollar is caught between a downdraft due to employment data that didn't meet expectations and the upswing of Asian sentiment which bodes well for the country. Australi are far enough away from the Middle East so as not to be caught up in ti.
The Swiss Franc was a main beneficiary of the unrest. After having dropped back with the initial resolution of the Egyptian crisis, it was back in favor once Bahrain unrest surfaced.
The Chinese Yuan continues to appreciate and eventually it should start floating to the top of the pile. It remains an embattled currency as the developed nations complain about its imbalance and the Chinese Government is doing some window dressing before the upcoming G20 meeting.
The Euro dropped back into the bottom three as its fragile recovery was dented by the spreading of uprisings in North Africa and the Middle East. There is continuing work to try and deal with the debt in the zone but that is going to be a continuing theme for the foreseeable future.
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Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
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