By Gary Scott
The US dollar is dropping and the general
thought is, “get out of the dollar”. But which
currencies should we choose? We do not gain much by jumping
out of the fire into the frying pan. Numerous currencies
are fundamentally weak just like the greenback. Without caution,
it is possible to get out of the dollar now and into the
next currency that will collapse. We are looking at all currencies,
every way we can.
We have looked so far at the major currencies in terms of
trade balances, current accounts, federal deficits and interest
rates so far. You can see the previous messages in this series
at
Dollar Dives part 1
Dollar Dives part 2
Dollar Dives part 3
Dollar Dives part 4
This message looks at inflation.
Inflation is generally viewed in three ways, change in consumer
price, producer price and wages. To simplify matters we can
view consumer price increases as inflation now. Increased
producer prices is inflation in the months ahead. Increased
wages is inflation next year. Here are the current inflation
statistics for the major countries:
| Country |
Consumer Prices |
Producer Prices |
Wages |
| Denmark |
1.9% |
3.8% |
2.9% |
| Sweden |
1.1% |
4.9% |
3.4% |
| Canada |
2.2% |
0.6% |
0.6% |
| Australia |
2.8% |
4.8% |
5.3% |
| Switzerland |
1.0% |
1.6% |
0.6% |
| Euro |
2.2% |
5.4% |
2.4% |
| Britain |
2.0% |
2.2% |
4.2% |
| USA |
3.2% |
3.6% |
4.7% |
| Japan |
0.5% |
0.6% |
0.4% |
Switzerland and Japan are the winners here, but we must
view the Swiss franc with caution. It cannot be allowed to
appreciate too much against its major trading partner the
euro. I have been warning about this for years.
Canada is really on top! Canadian inflation is modest now
and there are almost no inflationary trends in the pipeline.
This suggests at least one big thread of currency strength
in the months and even years ahead for the CAD.
Britain is also in good shape in the intermediate term,
but has a big wage increase that could haunt next year.
Denmark and Sweden are good now as well but facing big producer
price increase which could create inflationary trends later
this year. They even so still look better than the euro.
Australia and the US are once again in the bottom. The beginnings
of a bleak picture are forming for these two currencies.
Inflation is one more picture in the puzzle that is suggesting
a very strong Canadian dollar, good Danish and Swedish kroner
and strength in the Swiss franc and Japanese yen as well.
However there is more that we’ll look
at next week including which equity markets to choose during
currency turmoil.
Learn how to cash in on distorted currencies.
Our May International Investing Course is full and has a
waiting list, but you can reserve a place to join Merri,
and me at our September International Business and Investing
Made EZ Course in North Carolina, Friday, Saturday and Sunday,
September 15-16-17. DETAILS
Don’t delay. Learn to Diversify
with the MultiCurrency Sandwich before September. DETAILS
Until next message, have a good weekend.
Gary
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