Can’t stomach the violent swings in the equity markets? One analyst recommends switching out to currencies.
“In currencies, there’s no such thing as a bear market. Currencies are always traded in pairs so you’re always long one currency and short in the other, Kathy Lien, director of currency research at GFT said at the Asia Trader and Investor Convention held in Singapore.
Lien cites the U.S. dollar and the yen as an example. The pair has been making waves since the start of the year and has provided good opportunities for traders to make profits in either direction.
Lien’s personal bet though is on the Australian dollar .
“I am very bullish on the Australian dollar. The Australian economy has been holding up extremely well in comparison to the rest of the world. They’re benefiting from the rise in copper prices – they supply both the U.S. and China – and, although Chinese growth has pared back significantly, there’s a possibility that China’s near its bottom,” says Lien.
Australia looks set to benefit from a pick up in either country, as the foundation for solid growth has already been set.
Lien expects the Australian dollar to outperform many other currencies, not just the U.S. dollar and says there are many opportunities to profit from different pairings such as Aussie/euro and Aussie/Kiwi (New Zealand dollar).
“This outperformance in the currency is probably going to last for the remainder of 2009. The call for the Australian dollar trend is something that will last a couple of months. Any opportunity to buy in dips is probably an attractive one. Usually 70 cents is a nice support level that may afford you good opportunity,” Lien says.