Greg Weston

The Reflation Trade Portfolio

I disagree with general buying of emerging market currencies. In times of geo-economic crisis, they have generally performed much worse than developed economy currencies.

In developed economies, there is a more of an economic cushion during downturns and a higher degree of political stability, so monetary policymakers can avoid the temptation of engaging in competitive devaluations with other economies.

Another issue with emerging market currencies is who are your counter-parties? Will they still be solvent and ready to pay you and other people who shorted the dollar if there is a sharp drop in the dollar? Perhaps not.