Weakening Pound Sterling – Will Aussie $ Benefit?

Weakening Pound Sterling – Will Aussie $ Benefit?

Anyone who’s been reading for the few months know what a big fan I am of the Aussie $. Here’s another angle why it’s due to rise from the Daily Pfennig and Chuck Butler.

You know… A month ago, while I was in Florida on Marco Island speaking at the Wealth Masters Conference, my colleague, Chris Gaffney told everyone that pound sterling had seen better days, and he looked for pound weakness… He was quite bang on, eh? I have to say that I truly believe that the U.K. has similar problems as we do in this country with regards to housing… The one thing they don’t share with us is rising inflation! Interest rates will come down in the U.K. this year, and that will end pound sterling’s run as a financing currency of the Carry Trade…

So… If pounds get sold on one side of the Carry Trade, investors will be looking for other high yielders, like Aussie dollars… Where interest rates aren’t coming down, and in fact could be going higher as we go along in 2008…

Unfortunately the Aussie is struggling to break to the upside – the unwinding of the carry trade continues to slam it down everytime a rally starts. We’ll keep an eye on the situation here for good entry points.

On an aside, look for faster Renminbi appreciation this year. I think it was up about 7% against the US dollar last year – but down against many currencies (the US dollar depreciated about 9% last year against a basket of major currencies – yikes!)

The Chinese gov’t won’t let you buy Renminbi directly, so the best you can do is use a place such as Everbank, which can give you an account that tracks the currency.