While global stock markets swing wildly in search of direction, your Global Stock Investor positions continue to thrive.
Your currency bets clocked record gains last week, before correcting yesterday, as global currencies recorded one of their sharpest moves ever. The Market Vectors Double Short Euro ETN (DRR), Direxion Funds Dollar Bull 2.5x Fund (DXDBX), and the CurrencyShares Japanese Yen Trust (FXY) all hit record highs this past week, even as global stock markets continue to get pummeled.
The Direxion Funds Dollar Bull 2.5x Fund (DXDBX) is now up 16.8% in the two short weeks it has been in the Global Stock Investor portfolio. The U.S. dollar continued its remarkable strength last week, surging higher as investors unwound riskier positions and returned to cash. Before correcting on yesterday’s market surge, the Greenback had risen 9% to a six-year high of $1.5751 against the British pound, climbed 5.2% to a two-year peak of $1.2721 against the euro and gained 7.8% to C$1.2737 against the Canadian dollar. Tighten your stop to $39.90.
The Market Vectors Double Short Euro ETN (DRR) hit a high of $62.00 in intra-day trading on Monday, before falling back yesterday. Nevertheless, DRR is now up 20.46% since we re-entered the position on Oct. 1. With European finances strained by both country and bank bailouts, I expect the euro to resume its downward trend soon. The recent slight pullback is a good time to add to your position.
The CurrencyShares Japanese Yen Trust (FXY) soared to as high as $108.79 last Friday, as the carry trade continued to unwind and investors around the world liquidated positions in equities, commodities and higher-yielding currencies. The yen hit 13-year highs against the dollar and pound, and jumped to a six-year peak against the euro. On Monday, the G-8 governments started making noise about talking the yen down. The yen fell 5.25% against the dollar, its biggest one-day swing since 1974. The yen has moved more than 1% against the dollar 10 times this month. In October 2007, it didn’t move that much even once. Use this weakness as an opportunity to add to your position.
The chart below, comparing the performance of the CurrencyShares Japanese Yen Trust (FXY) to the S&P 500, illustrates the remarkable inverse relationship between the performance of the yen and the U.S. markets. When U.S. markets fall, the yen rises. On days like yesterday, when markets soar, the yen falls.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) stayed steady this week even as the yuan eased slightly from a one-week high against the dollar, as the People’s Bank of China set today’s central parity rate for the dollar-yuan pair at 6.8318. You won’t get a lot of movement in this currency as the yuan’s daily trading band is currently set at 0.5%.
I continue to believe that the U.S. dollar and the Japanese yen are the only safe havens in the midst of global stock market turmoil. With the currencies moving so sharply, I expect a correction against the trend after extreme moves similar to the one we’ve had in the Japanese yen over the past two days. I encourage you to add to your existing position when that happens. Over the medium term, I continue to expect your currency positions to strengthen, particularly as European currencies continues to crumble.
All of the current Global Stock Investor recommendations remain BUYs.
P.S. Surging oil and food prices, as well as deteriorating economic confidence, have stoked inflation fears around the world in recent months, leaving volatile markets and jittery private investors in their wake. In times such as these, it’s good to have this forum to discuss key developments and to hear from the best financial minds in the world. I invite you to join me at the 4th Annual World Money Show London, 14-15 November, at the Queen Elizabeth II Conference Centre. Call 800/970-4355 and mention priority code 009613 or visit The World Money Show London to register FREE today!