Rus Articles Journal

Dollar or euro?

investors believed Until recently that the dollar loses the role of world reserve currency and will yield the palm to euro or yuan soon. The obvious facts like huge budget deficit, the inflating public debt, apparently, unambiguously indicated it. Since the beginning of 2009 by November of euro grew from $1,3 to $1,5. At such moments of private investors covers keen desire immediately to buy euro. As a rule, it occurs when cross-country - courses reach extreme values. Since November, 2009 euro fell in price from $1,5 to $1,30 again - by 15%. The progressing crisis in Europe, problems of Greece, talk on fast disintegration of the European Union - investors speak only about it now and sell euro. It is good if not on a minimum.

In what currency to store money and how to be protected from these fluctuations? However, the question costs to a thicket more narrowly: dollar or euro?

the US dollar is not just world reserve currency. Its dominating role reflects a position of economy of the USA in the world. The relative size of the American economy remains stable with 1960 - x years and makes 30% of world GDP. From the point of view of the financial markets leadership of the USA is even more obvious. Market capitalization of the American market makes 57% from universal, the bond market occupies respectively 39% of universal volume. The global monetary standard in the world one - dollar. And whatever politicians from stands spoke, this fact will not change still very long owing to the objective reasons.

Everything told does not exclude

at all that the dollar can become cheaper further concerning currencies of those countries which economy is in the best form and which can brag of considerable surplus of the balance of payments. First of all, classical “raw“ currencies, such as the Canadian and Australian dollars and Norwegian krone, and also a row of Asian and Latin American currencies and, certainly, ruble get to this category. Here it is possible to carry also the Chinese yuan which rate artificially restrains.

Well and, at last, euro. Today only lazy does not predict euro the fast end. This currency generated a huge number of problems which threaten to turn back long economic recession for the countries of the eurozone or to end with currency crisis - perhaps, he will force certain members to think of an exit from the union. However such scenario nevertheless is rather extreme. Besides over the last 10 years euro became sound reserve currency. Euro share in universal currency reserves makes 28%. It is so simple to refuse euro it is impossible, as well as from dollar.

Unfortunately, a definite answer to a question, what currency to prefer, does not exist. We are waited by the instability period in the foreign exchange market - it is new reality within which it is necessary to live in the next years. Fluctuations of currencies can be sharp. In situations when rates are low and effect of their change it is insignificant, exchange rates became the instrument of regulation of economy.

Nevertheless, an exit nevertheless is. In - the first, decide on the main settlement currency of an investment portfolio. Let`s say you are going to own in the future real estate in Europe, you should serve it, to pay taxes. It is obvious that your settlement currency - euro. In this case the investment portfolio has to be built in this currency. It is not necessary to begin everything to convert at all into dollars when euro falls and vice versa.


In - the second, it is necessary to decide on the expected level of profitability and risk in settlement currency and to make a portfolio taking into account these parameters. For example, one our client wanted to receive profitability on a portfolio with basic currency of euro 5 - 7% per annum. Profitability on two-year German bonds made 0,9% per annum. We advised short-term papers to reduce dependence of investments on change of interest rates. To lift profitability to the required level, we placed part of a portfolio in the tools released in currencies of developing countries (for example, Brazil) where the prospect of growth of the price was combined with a high probability of strengthening of currency.

B - the third, it is worth thinking of hedging options, for example by means of currency swaps - the tools allowing to be protected from adverse change of exchange rates. The more hedging level, the, obviously, is lower profitability. In a case with our portfolio in euro we did not hedge currency risks, hoping to earn from an exchange difference in currencies of developing countries the main profit on a portfolio.

B - the fourth, and this the most difficult, it is necessary to try to adhere to the chosen course.