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Consider trading foreign currencies, which just a couple of decades ago was an option mostly restricted to big money investors. Now, it’s widely available to the general public, and generating increasing interest.
Trading currency in foreign exchange markets, or FOREX, the world’s largest securities market is available to anyone with small capital. The essence of foreign currency trading is simple. You buy one country’s currency with that of another country. If the exchange rate changes in your favor, you buy the original currency back at a profit.
Educate yourself on how the foreign exchange markets work…
If you’re looking to short Western currencies, one possibility is to short them against emerging-market currencies, such as the Chinese yuan, the Indian rupee, the Brazilian real and the Russian ruble.
India and Brazil are running large government budget deficits, in spite of their amazing booms, and both currencies are highly vulnerable to a sudden monetary tightening or a downturn in the global economy.
China, tightly manages its currency. There is certainly potential for the yuan to rise, provided that China maintains its present policy of allowing fairly free inflows of foreign capital while barring outflows of its own savers’ money.
Canada and Australia are reasonably well-run countries with large commodity exposures. So they should do well as long as the current commodity boom continues.
In the Asia-Pacific region, South Korea, Taiwan, and Singapore all have superbly-run economies that are structurally sound.
A currency portfolio that contains those five currencies – the South Korean won, the new Taiwan dollar, the Singapore dollar, the Canadian dollar, and the Australian dollar – could thus be relied upon to maintain its value better than most.