Few would disagree that the greenback is to be weakened significantly in the long-run but in the short-run, it is as unpredictable as a madman’s concert. A six-week stock rally of questionable sustainability; a flurry of government moves to revive the credit markets; mixed first-quarter earnings results for large U.S. banks; mounting speculation about bankruptcy for two of the big three U.S. auto makers; and policy pronouncements from international finance officials has been like a canon piece blasting from left to right and fro. Too many factors can pull or push the greenback in any direction which makes staying away the only smart choice. How does the other currencies compare?
Yen will likely weaken for the rest of the year because of its weak trade numbers. The strength of its currency actually hurt Japan badly because it is an export dependent country. However if the global market goes into mass panic, we could see the Yen strengthen while its economy weakens. Yet, I doubt that will happen as most people are now more prepared for the worst than better.
Times are difficult but will especially be so for the Euro which lags behind U.S. in feeling the effects of the full-blown recession. Even though they have been reluctant to cut interest rates, this quarter they are expected to cut to 1%. Throw in the 2 elections in Europe in 2009 for new Chancellor of Germany and European Parliament, you will likely see the Euro under even more selling pressure.
The Canadian Loonie’s recent surge will likely continue if oil price continues to inflate though lack of demand and alternative substitutes will eventually curb the oil price climb. However, unless oil climbs to ridiculous levels, I do not see a competitive substitute any time soon. As for the falling bond yields which makes Canadian investments less attractive, I believe they will be offset by the stabilization of the Canadian real estate and banking industry. Actually, I am feeling optimistic about the Canadian real estate because demand is unusually high recently probably indicating some unknown favorable criteria it possess. It's weird but I hope it is in a good way.
Recently I pondered why many people neglect to use bonds which are excellent and effective indicators to predict future economic activity and future levels of inflation, both of which directly affect the price of everything from stocks and real estate to household items. Some may argue that we are in a global recession now so we do not need yield charts to know that things are not looking bright. But nonetheless, it is a waste not to understand how useful a bond yield curve is. Do you know the bond yield graph reads the fed funds rate, market consensus of future economic activity and interest rates. In addition, the slope of the graph can tell you expectations of short-term interest rates. In short, you can predict the potential of the market. More information never hurts.
So this is my advice for prudent investors: if you want to play the game well, you need to learn all the rules well first and do your homework. If not, I reiterate: it is best to stay away.
Yen will likely weaken for the rest of the year because of its weak trade numbers. The strength of its currency actually hurt Japan badly because it is an export dependent country. However if the global market goes into mass panic, we could see the Yen strengthen while its economy weakens. Yet, I doubt that will happen as most people are now more prepared for the worst than better.
Times are difficult but will especially be so for the Euro which lags behind U.S. in feeling the effects of the full-blown recession. Even though they have been reluctant to cut interest rates, this quarter they are expected to cut to 1%. Throw in the 2 elections in Europe in 2009 for new Chancellor of Germany and European Parliament, you will likely see the Euro under even more selling pressure.
The Canadian Loonie’s recent surge will likely continue if oil price continues to inflate though lack of demand and alternative substitutes will eventually curb the oil price climb. However, unless oil climbs to ridiculous levels, I do not see a competitive substitute any time soon. As for the falling bond yields which makes Canadian investments less attractive, I believe they will be offset by the stabilization of the Canadian real estate and banking industry. Actually, I am feeling optimistic about the Canadian real estate because demand is unusually high recently probably indicating some unknown favorable criteria it possess. It's weird but I hope it is in a good way.
Recently I pondered why many people neglect to use bonds which are excellent and effective indicators to predict future economic activity and future levels of inflation, both of which directly affect the price of everything from stocks and real estate to household items. Some may argue that we are in a global recession now so we do not need yield charts to know that things are not looking bright. But nonetheless, it is a waste not to understand how useful a bond yield curve is. Do you know the bond yield graph reads the fed funds rate, market consensus of future economic activity and interest rates. In addition, the slope of the graph can tell you expectations of short-term interest rates. In short, you can predict the potential of the market. More information never hurts.
So this is my advice for prudent investors: if you want to play the game well, you need to learn all the rules well first and do your homework. If not, I reiterate: it is best to stay away.
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