Bill Baruch, president and founder of Blue Line Futures, reviews and previews the euro, Japanese yen...
“Sell in May” Doesn’t Apply Here
04/28/2011 6:00 am EST
The US dollar’s continued plunge means currency traders should be on alert and ready to buy fast-rising Asian currencies including the Singapore dollar, Chinese yuan, and others.
As a trader and reader of MoneyShow.com, you’ve probably heard the old adage, “Sell in May and go away.” That usually refers to stocks, but I’m here to tell you a different story for currency trading.
As the US dollar continues to wobble lower, a climb in Asian currencies appears to be led by the soaring Singapore dollar (SGD), which reached a record last Friday, alongside a 13-year peak by the Malaysian ringgit, as many expect regional central banks to continue hiking rates to battle inflation, according to Bloomberg.
(Construct free forex charts with Bollinger bands here.)
The Bank of Thailand joined this trend last Wednesday with its sixth rate hike this year, and expectations are for further such tightening in the near future.
The Bloomberg-JPMorgan Asia Dollar Index rose to its highest point since 1997 as investors bought far more stocks than they sold in the Asian economies of Thailand, India, South Korea, and Taiwan.
The Singapore dollar appears to have lost some steam since it peaked last Friday at 1.2317 against the greenback—its highest mark since at least 1981.
Many analysts are forecasting a continuation to the SGD’s surge as the region makes continued gains from a recent boom in consumer confidence towards companies with large bases in the region.
Alongside the SGD’s ascent are the concurrent rises in Asian currencies such as China’s yuan, Malaysia’s ringgit, Thailand’s baht, and the South Korean won.
All of the aforementioned currencies are in bullish channels against their Western counterparts amid expectations for further monetary policy tightening in the months ahead, which will no doubt fuel this rapid climb.
Look to go long on Asia in the weeks ahead as this trend continues.By Greg Holden of ForexYard.com
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