The trend in 2011 for the USD index is down and just recently it broke the previous low set in November 2010 of 75.63, now setting a 15 month low of 75.43. See the chart below for an 18 month view: Click to enlarge
(Click chart to enlarge)
Where is the dollar headed? Last week the G7 agreed and acted in concert in selling the Japanese yen to support the Japanese government with its tribulations of earthquake, tsunami and nuclear reactor concerns. This drove the yen (NYSEARCA:JYN) back downward to a more manageable 81 to USD ratio. The British pound (NYSEARCA:GBB) has strengthened to .61 to the USD with the outlook for a possible upcoming interest rate hike. The Euro (NYSEARCA:ERO) Index is sitting inversely to the USD at a 4 month high of 142.44 with similar interest rate expectations of an increase. The USD is caught between these major world currencies.
Even with the unrest in the world of the North African and Middle Eastern democracy movements, the USD has not seen upward movement as the currency of safety. Could the market sentiment be changing in recognition of possible inflation forthcoming for the USD environments?
With the recent drop last week in the markets, commodities and precious metals led by the Nikkei dropping 10%, where is the most opportunity? Well, energy, commodities and precious metals that are priced in USD are at the verge of new highs. If the USD continues this path downward, the commodities and precious metals may be the place to be to reap the gains from the fundamental drivers of emerging economic growth and the benefit of the weakening currency that these goods are priced in. Energy is a special case, as it is also subject to other drivers. However, most commodities have recovered last week's losses and are moving higher with supply and demand factors driving. Precious metals are on a new movement upward and looking to break to new highs, having also recovered from most of last week's turmoil.
With the prospect of further USD weakness, there may be opportunities in US multinationals, where sales are priced offshore, but the author is primarily an investor in the commodities, metals and precious metals space. I am holding positions for the possible rising metals and precious metals priced in USD. I am invested in miners such as Goldcorp (NYSE:GG), Franco Nevada (FNNVF.PK) Silvermex (GGCRF.PK), US Silver (OTC:USSIF) Great Basin Gold (NYSEMKT:GBG) and exploration Juniors such as Torex Gold (OTCPK:TORXF), Victoria Gold (OTCPK:VITFF), Canadian Zinc (OTCQB:CZICF), Atac Resouces (OTCPK:ATADF) and Almaden Resources (NYSEMKT:AAU).
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