Like the rest of the financial market, the foreign exchange market, too, is prone to prolonged periods of irrationality when emotions ride high and reason runs low. This is currently the case. Foreign exchange markets turn a blind eye to the problems that plague the dollar and ignore the fact that as of now it is mainly only the Europeans who earnestly adress their debt problems, not only in those countries that are under immediate threat of default such as Greece or Spain, but Germany as well. In the meantime the pundits in the US drum the mantra of more and more spending. Financial markets always have focused on the short run but recently this shortsightedness has turned into blindness. In an environment like that profit chances have never been higher for those with some patience and a long-term view.
Going short on dollar bonds and long on the euro emerges ever more clearly as the most profitable investment strategy for the time to come.
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