| Don't underestimate his strong dollar policy |
| Source: Deutsche Bank |
Searching through emerging-market currencies for investment opportunities is a tricky job - a delicate combination of subjective judgement and fundamental analysis. Luckily, plenty of currency pundits were on hand at Euromoney's forex forum last month to help investors and corporate hedgers choose a strategy.
Avoid commodity-dependent Venezuela, advised Juliette Declercq, a strategist from JPMorgan. Watch out for a sharp improvement in US economic conditions, warned Robert Kahn from Citigroup. Go long the South African rand and the Hungarian forint, urged others.
One panellist raised a laugh when he neatly summarized what many are now thinking. "The US is looking like an emerging market," quipped Ruchir Sharma, a managing director at Morgan Stanley Investment Management. "And emerging markets are looking more like the US."
He wasn't entirely joking. Capital is flowing back into emerging markets for the first time since the last great stock market bubble. Meanwhile, the dollar is collapsing. The US is running a spectacular trade deficit. According to a US Treasury report leaked last month, current economic policies risk causing a budget deficit as high as $44 trillion.