By Ashish Advani I want to take you on a tour today of two of the most popular exotic currencies in the Forex market. These currencies happen to be complete opposites in almost every way.

The first currency offers some of the most compelling long-term buying opportunities in the world right now with healthy balance sheets, wealthy benefactors, and a positive long-term growth story.

The second…well, let’s just say it’s a great shorting opportunity if nothing else.

In fact, the only thing these two currencies have in common is they’re both considered commodity plays.

Let’s start with the buying opportunity. To go there, let’s head to the land of Samba and Feijoada first. Yes we are in Brazil.

As I told you yesterday, the Australian dollar has leapt 15% since the beginning of the year (indeed, that’s one reason why the Aussie is my favorite currency over the next six months). But while the Aussie has climbed 15%, the Brazilian real has shot up 22.5% year to date. It is running hotter than all currencies against the U.S. dollar.

You can attribute a lot of this to the world’s insatiable demand for Brazilian commodities – especially the ones China and India are gobbling up. China’s influence in Brazil has reached such an extent that you could be buying a Brazilian stock as a China play these days.

In fact, a Chinese company recently granted a $10 Billion loan to Petrobas (Brazil’s largest oil company) in exchange for first rights to the oil that Brazil will drill at its new found reserves.

The theme that I introduced yesterday in Australia (China buying up the world’s commodity reserves strategically) is alive and kicking in Brazil too. As I have said before, as China continues its strategic grab for world power, Brazil will remain relevant in the global economy.

The Currency to Forget (Or Short)

I’ve heard traders say they wouldn’t touch the South African rand with a 10-foot pole. The reason?

For starters, South African does not have one of the more efficient economies in the world. There is far too much influence on economic policies by outside vested interests, which interfere in their ability to carry out true reforms. This is a major problem for South Africa.

The Central Bank policy and decision making is heavily influenced by vested interests who do not want decisions being made that hurt their business interests. This creates ambiguous messages from the economy.

Recession has taken a strong hold in the South African economy and is creating a major slowdown spiral, which will really hurt the future prospects of South Africa.

While the currency has not yet shown the effects of the slowdown of the economy, I expect that this will happen soon and the world cannot continue to sweep the problems under the rug forever.

I think it goes without saying that I would be very reluctant to invest in South Africa or in the South African rand for now. There is too much bad economic news that has not been factored in, which will create huge uncertainty in these markets.

We can effectively utilize our capital allocation around the globe without having to invest in South Africa and I would give it a pass for now.
I’ll be back soon with more insider looks at countries around the world. Till then…

Yours in FX Profits,

Ashish Advani

P.S. Currency Capitalist members, please be sure to check out your new issue online this weekend. I’ve uncovered a way to tap into one commodity-rich nation and grab a 9% yield! Please see all details in your August issue. Don’t receive our monthly newsletter? Click here to test-drive this next issue…completely risk-free.