Sluggish Economies Steal Investors from the High Yielders

By Sean Hyman

As central banks slash rates, the traditional high-yielding currencies are quickly losing their investor appeal. After all, who wants to invest in a riskier currency, when  you can’t even secure a higher yield?

On the contrary, it’s the traditional “low yielders” that are profiting from this crisis. The Japanese yen is already leading the charge. And it’s not done yet. I see the yen heading higher until we find a bottom in stocks.

The U.S. dollar is right behind the Japanese yen. During this credit crunch, there has been an enormous demand around the world for U.S. dollars. Many countries are having a hard time getting all of the U.S. dollars that they need in order to buy goods that are priced in dollars, especially commodities such as oil.

This has put a demand upon the buck that probably won’t subside until stocks bottom.

The highest yielding currencies will likely suffer the most at the hands of the yen and U.S. dollar (such as the New Zealand dollar and the British pound, etc.).

Therefore, until we stop having panic selling in the stock markets, we won’t see anything happening in the favor of the higher yielding currencies. This will continue to put pressure on all high-yielders until investors see the crisis dissipating.

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