Tags: emerging | currencies

Get In Now On Emerging Market Currencies

By    |   Thursday, 14 May 2009 03:15 PM

The last couple of months have been relatively calm for the financial markets. Volatility is about a third what it was just six months ago.

So, now that the fear is dying down, money is starting to move out of safe investments like bonds, especially Treasuries, and back into stocks. In fact, the bond market is falling for the first time in well over a year.

What's more, not only is money flowing back into stocks, it's also flowing back into the emerging markets. Emerging stock markets from Taiwan to Turkey to Brazil have all stabilized and some have even started mild up-trends once again.

One of the best and least riskiest ways to invest in emerging markets is to invest in their currencies.

Before investors can buy these foreign stocks, they have to sell their home currency and buy the currency of the foreign country to make their stock purchase.

The same goes for when foreign investors buy these countries' bonds.

But, why would you want to invest in emerging markets? They have higher inflation rates and higher rates of economic growth. Therefore, it requires higher interest rates to keep inflation in check. Currency investors love rates that are high and going higher because they get to earn a high rate of interest on their money, one that's typically much higher than what they can get on their home currency.

So, if markets are stable or rising, this is a great place to have some of your money. However, when markets turn south and recessions begin, it’s a tough place to be.

So, the best time you could consider entering these markets is when the trough of a recession has passed and we’re on our way out.

According to recent comments from Paul Volcker, Ben Bernanke, and the G-7, they seem to think that the worst is over even though we’re not quite fully out of the recession yet.

As long as we’re past the worst of the recession, then it’s the ideal time to invest in these countries and therefore their currencies.

These currencies can appreciate very rapidly.

So which currencies are some of the best candidates? The South African rand and Turkish lira.

These countries have high inflation and high interest rates, and they are some of the more trusted emerging economies. So far, the South African rand has been the No. 1 percentage gainer this year because the country is a huge commodity exporter. It has a lot of gold that it mines and exports, and if there’s a commodity that has held up well while others fell off a cliff, it was gold.

As countries around the world have printed tons of money in the past year, their currencies have been diluted. That causes gold to hold up well. So, currency investors have the biggest confidence in countries that mine and export gold and other commodities that are starting to stabilize and turn up now.

© 2017 Newsmax. All rights reserved.

 
1Like our page
2Share
SeanHyman
The last couple of months have been relatively calm for the financial markets. Volatility is about a third what it was just six months ago.So, now that the fear is dying down, money is starting to move out of safe investments like bonds, especially Treasuries, and back into...
emerging,currencies
490
2009-15-14
Thursday, 14 May 2009 03:15 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved