I agree with your views on the EUR. They have the following additional +ves to the point you made about it being the alternative reserve currency:
a) all the -ves (that pulled the EUR down from 1.36 to around 1.17 vs USD) are now in the open or resolved: the French riots, the Italian elections, the German cliffhanger election outcome and threats of more Madrid-style bombing incidents;
b) I will get to see it all in person in a fortnight, but what I've read recently is that the new EU members such as Poland, Hungary and Czech republic states are now on healthy growth patterns, along with the traditionally strong economies like Holland, Denmark, Finland and Ireland;
c) EU seems to be better 'switched on' to international politics in 'hot spot' areas such as Middle East, Russia, LatAm, East Asia (esp. China) than the US. The latter may be winning the war (I don't know at this stage if this is true anymore) but definitely not winning the 'mind and money' battles in any of these regions;
d) even the hot issue of UK not joining Euroland is now put to bed, as it seems like they will stay out forever, and it doesn't matter anymore!; and
e) the EU does not have any of the cash and human resource 'drain' issues afflicting the US in its war on terror in places such as Afghanistan and Iraq (even leaving aside Iran for the moment).
I 'feel' therefore the EUR is well placed to rise against the USD, at least to 1.36, which is the previous high. Surely, the hedge funds which played a big part in running a 'contra' operation to pull the EUR from 1.36 back to 1.17 over the past 1 1/2 years must now salivate at the prospect of taking it back up to at least 1.36, or maybe more.
But against this, I feel that:
- with the Canadian elections now over,
- with everything one hears about what the new Canadian government doing being smart and without any transition issues,
- their being well positioned in all the 'hot spots' of the world (esp. LatAm and China), and
- a basically sound, truly diversified, but commodities based, at least globally speaking micro-economy
the CAD should be at least as attractive as the EUR for Central Banks desperately seeking alternatives to the USD.
As for the AUD, again, the elections are over, their finances are very sound (as is no national debt anymore), and they are, from where I live, very 'street smart' about their Immigration policy. They desperately need human resources to sustain their economic growth, but they pick and choose only the hard working, well qualified, good English speaking, trouble avoiding immigrants from countries in SEAsia and North Asia (esp. South Korea, China). Anyone else who tries to enter the country is immediately cordoned off, given 2 square meals a day until they can be shipped back to their originating country.
Besides, with only about 28 million people, they can easily micro-manage these problems.
So, I keep wondering, what are the large Central Banks (as in China, Taiwan, SKorea, India, Middle Eastern) doing to diversify their FX holdings these days, is it all going to EUR or, is there a possibility that they are also moving to CAD and AUD, much as in years past, the CHF used to be the bee hive of last resort. If you look at yesterday's FX moves, the CHF gained more than any other currency vs USD, and there is no economic logic to it other than its traditional 'draw' as a haven in troubled times. If only, I was thinking, the CAD and AUD began to have the 'draw' factor like the CHF for the Central Banks.....and if we knew the answer to this, we could just follow them like blind sheep.....
On another point, it is still a wonder to me where and in what currencies the treasury holdings of the likes of Microsoft, Cisco, Intel, ExxonMobil, etc gets held these days, as they surely have FX holdings matching those of many countries these days.
Selva |
