Forex Lasers Forum

Forex Lasers Forum (https://www.forexlasers.com/forums/)
-   Forex Articles (https://www.forexlasers.com/forums/forex-articles/)
-   -   The Safest Currencies in the World (https://www.forexlasers.com/forums/forex-articles/4326-safest-currencies-world.html)

ForexArticles 02-11-2017 22:40

The Safest Currencies in the World
 
The problem with currencies is that the safest options usually donít offer a big reward. At least with top tier stocks youíre usually receiving a dividend. Nevertheless, let's take a look at the safest currencies in the world. There is actually one surprise currency that does have significant upside potential over the long haul.

Forward Looking Approach
Letís remove day to day exchange rates from the equation and take a forward looking approach. The U.S. dollar is the biggest enigma to investors at the moment, but there are logical reasons for its behavior: Interest rates are likely to increase later this year. With quantitative easing coming to a close, investors are piling back into the U.S. dollar.

The European Central Bank (ECB) plans on purchasing $1.16 trillion in public and private sector bonds by 2016. This will primarily be done in the larger economies: Germany, France and Italy. Aside from Germany, the Eurozone is suffering from high unemployment, and itís hopeful that injecting money into the economy will provide an assist. Either way, this won't help the euro against the U.S. dollar.

The Bank of Japan (BOJ) recently upped its annual purchases of government bonds to 80 trillion yen from 60-70 trillion yen. The Japanese are fighting hard against deflation. Unfortunately, theyíre not realizing that you canít stop deflation, especially when you have the oldest consumers in the world. Once again, this move will not help the Japanese yen against the U.S. dollar.

Based on the points above, we can see that the U.S. dollar is likely to appreciate (for now), and that the euro and Japanese yen would be high risk. In regards to the euro, the Swiss National Bank (SNB) recently abandoned its currency peg to the euro ó a sign of no confidence.

U.S. Dollar
As far as the U.S. dollar is concerned, it looks like a great bet at the moment, but U.S. dollars are Federal Reserve notes. Now consider that the Federal Reserve has $2.2 trillion in Treasury debt and $1.5 trillion in mortgage-backed securities.

The U.S. dollar is currently in bull mode, and thatís likely to last for a considerable amount of time. On the other hand, while the Federal Reserve is capable of bailing everyone out, eventually, whoís going to bailout the Federal Reserve? The answer to that question might irritate you, because the answer is likely going to be you the taxpayer. That said, the United States is very good at finding ways to win and thereís no telling what creative ideas those in power will come up with next. Hopefully, a creative solution will be found. But is that something you want to bet on? Probably not.

Norway And Singapore
The Norwegian krone has been known as a safe currency, thanks in large part to Norway having no net debt. The Norwegian krone is also a standalone currency which means itís not tied to another countryís failures. The krone hasnít been performing well as of late due to economic data not meeting expectations and falling home prices. The latter has slowed the consumer. However, with a disciplined and responsible system in place, it should remain a good long term bet. (For more, see: Countries that Still Have the Golden AAA Credit Rating.)

Then thereís the Singapore dollar, which has been attractive to investors because Singapore is now seen as the place to hide money for tax reasons. There might be opportunity here, but since this investment wouldnít be based on something sustainable, consider avoiding.

Then thereís that other currency referred to above, which has yet to be covered.

Gold
According to Dictionary.com, the definition of currency is as follows: ďAny form of money in actual use as a medium of exchange.Ē Therefore, gold applies. The best attributes for gold: can be bought and stored, easily converted to almost any currency, highly liquid, limited supply.

That last point is especially important because it separates gold from all the fiat currencies (not backed by a physical commodity) around the world. Many people want to go back to the gold standard, but others will argue that the gold standard didnít work either. The truth is that no system is fool proof. While the gold standard had its short-term fluctuations (expected), it lasted for well over a century as well as periods of time prior to the 19th century. (For more, see: How Can I Invest in gold?)

The problem with investing in gold today is that the U.S. dollar is in favor, which usually trades inversely to gold. Even if the stock market and/or economy tanks, gold isnít likely to hold up because all commodities come down in a deflationary environment. If you look at our small stint of deflation during the financial crisis, you will see that gold suffered prior to the Federal Reserve stepping in. That said, once deflation is realized and accepted, opposed to just a fear, the economy should begin to bottom. It will take time (perhaps years), but this should present a great opportunity to buy gold. When organic growth returns, inflation will ramp up, which will make gold intriguing. In fact, gold could hit new highs.

The Bottom Line
A perfect currency doesnít exist. If you want to invest in the U.S. dollar, then youíre timing better be excellent. If you want to invest in the Norwegian krone, itís safe, but there isnít much upside. The Singapore dollar? This could present rewards, but itís not based on honest and sustainable policies. Gold is probably the best bet, but not at the moment.




BubbleGum 03-11-2017 03:12

Re: The Safest Currencies in the World
 
I believe EUR USD is the best pair to trade for the market so these 2 currencies are most safe because they are traded the most. So getting the high volume movement for trading within this one is easy and safe too.

HockeyWain 03-11-2017 08:12

Re: The Safest Currencies in the World
 
Yeah, these pairs are the dealt with the Forex Trading quite a lot in the Forex Trading. I also deal with this pair.

alextrader79 03-11-2017 12:25

Re: The Safest Currencies in the World
 
and what about swiss Franc? Isn't it safer that EUR?

HockeyWain 06-11-2017 05:34

Re: The Safest Currencies in the World
 
All the traders have their own mindsets, and if the Swiss Franc is your favourite, you will find it safe, but I think EUR is more safe as it is my favourite thus we have our own mindsets.

BubbleGum 07-11-2017 05:21

Re: The Safest Currencies in the World
 
Agree, every trader has their own choice for trade pairs in the market. And according to that they choose the pair for trading.


All times are GMT. The time now is 04:10.

Powered by vBulletin® Version 3.8.10
Copyright ©2000 - 2019, vBulletin Solutions, Inc.