Finally Currencies React As Expected
03/11/2011 0 comments
It has taken a few weeks but finally the currency ETFs are reacting as expected as the impact of increasing oil prices drive down currencies across the board.
The general consensus may be that this is a temporary effect and the cost of oil is an artifact of speculators as much as real supply and demand but one can only hold on to that for so long before bowing to the inevitable pressure.
| Assets Class | Symbols | 03/09 Trend Score | 03/02 Trend Score | Direction |
|---|---|---|---|---|
| Swedish Krona | FXS | 7.57% | 8.52% | v |
| Swiss Franc | FXF | 6.32% | 7.26% | v |
| Australia Dollar | FXA | 5.56% | 7.23% | v |
| Mexican Peso | FXM | 4.83% | 3.72% | ^ |
| Canadian Dollar | FXC | 4.07% | 4.42% | v |
| US Dollar Bearish | UDN | 3.53% | 3.67% | v |
| Euro | FXE | 3.46% | 3.22% | ^ |
| British Pound | FXB | 3.0% | 3.87% | v |
| Japanese Yen | FXY | 2.05% | 2.65% | v |
| G10 Carry Trade | DBV | 1.73% | 2.41% | v |
| Chinese Yuan | CYB | 0.52% | 0.54% | v |
| Brazilian Real | BZF | -1.61% | -0.5% | v |
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
All of the top funds dropped significantly for the week although this isn't necessarily reflected in the economic conditions or the exchange rates.
There was not much news on the Krona. The Swedish economy continues to motor on and so the drop is purely based on world tensions.
The Swiss Franc rose against most currencies as it is continued to be a safe haven in these times of stress
The Aussie Dollar was not hit so much by the tension but by rising oil prices and China's trade deficit.
We note that the bottom currencies all had a better week than the top currencies as they march to the beat of a different drum.
We noted last week that the Chinese Government is in the midst of its annual people's congress and so not much will happen.
The Brazilian Real is still benefiting from increased interest rates and is less impacted by Libyan unrest
The G10 currencies current short positions in CHF, JPY, USD largely cancels out the long positions in AUD, NOK and NZD.
The turbulence was late in coming and it likely to only be a limited time effect. The Krona looks strong, the other top two are going to see some volatility. At the bottom, as we have said before, there is upside for the Yuan and the Real when government policies are seen as being in line with world expectations.
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.
Symbols: (NYSE,FXA),(NYSE,FXM),(NYSE,BZF),(NYSE,FXY),(NYSE,FXC),(NYSE,FXF),(NYSE, ,FXS),(NYSE,DBV),(NYSE,CYB),(NYSE,UDN),(NYSE,FXB),(NYSE,FXE),
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