Your currency bets took a break from their relentless move upwards this week as global markets’ sentiment improved. But the Market Vectors Double Short Euro ETN (DRR), Direxion Funds Dollar Bull 2.5x Fund (DXDBX), and the CurrencyShares Japanese Yen Trust (FXY) are all still firmly in positive territory.
This is a good time for me to outline the Global Stock Investor strategy between now and the end of the year. The challenge is to balance your firmly defensive posture with the inevitable sustained turn in global stock markets. It only takes a few positive days in the stock market to turn fear of losing into greed of missing out on the bottom. As markets continue to settle, we’ll be looking to dip our toes back into the markets with some of our “watch list” positions — Millicom International Cellular (MICC), Nextel International (NIHD) and India’s ICICI Bank (IBN). These positions will move quickly on any “relief rally” even as we enter the last two months of the year — traditionally the strongest part of the year for global equities. But given the still unsteady mood of the market, and the fact that Global Stock Investor focuses on profiting from medium and long-term trends, I am going to hold off on recommending that you get back into any of these positions just yet.
The Direxion Funds Dollar Bull 2.5x Fund (DXDBX) was flat this week. With the European Central Bank expected to cut its benchmark rate by 50 basis points to 3.75% on Thursday, and the Bank of England expected to cut interest rates by 50 basis points to 4%, look for the dollar to continue to strengthen against its European rivals. On Tuesday, Australia’s central bank also cut its benchmark interest rate by — a bigger-than-expected — three-quarters of a percentage point. Meanwhile, the Bank of Japan lowered rates last Friday. All this bodes well for the U.S. dollar looking ahead. DXDBX remains a BUY.
The Market Vectors Double Short Euro ETN (DRR) fell sharply yesterday as global markets rallied. Nevertheless, with the European Central Bank expected to cut interest rates this week to stimulate an economy that is already in recession, I expect the euro to resume its downward trend soon. Yesterday’s pullback is a good time to add to your position. DRR is a BUY.
The CurrencyShares Japanese Yen Trust (FXY) fell below the $100 level for the first time in several weeks, as investors’ risk appetite returned somewhat and Japan cut interest rates. Use this weakness as an opportunity to add to your position.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) stayed steady this week as the yuan was trading at 6.8388 per dollar around midday versus Monday’s close of 6.8381, after the central bank set the yuan’s daily mid-point against the dollar at 6.8261. The central bank has kept the yuan virtually in a range of 6.82 to 6.85 since mid-July, when the dollar began its strong global rally.
The U.S. dollar and the Japanese yen continue to be the only safe havens in the midst of global stock market turmoil. You’ll see your positions in these currencies rise on any “bad news” day in the market, as well as when interest rate cuts in Europe come through toward the end of this trading week. The long-term trend for the rising yen and dollar is still in place, and I encourage you to add to your existing positions here.
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!