Are there any beautiful currencies left, asks The Economist, even as it answers back - Australian dollar and the Canadian dollar, South Korean won and Brazil’s real. The trouble is lack of scale and liquidity which limits their role as reserve currencies. Overall an interesting article - getting the right answer is difficult.
- JOHN MAYNARD KEYNES once likened investing to judging a beauty contest. For today’s currency investor, however, none of the main contestants looks that fetching. “It’s more like an ugliness contest,” says one hedge-fund manager.
- The dollar, for all its blemishes, is the least hideous-looking. So far this year it has risen against the other main currencies (the yen, pound and euro) that are traded internationally and held as reserves by central banks.
- The pressure to tighten fiscal policy in some parts of the euro area will make it hard for the European Central Bank to even consider raising interest rates. A weaker euro also addresses the deeper cause of the present crisis: a lack of export competitiveness in the south of the currency zone.
With the American growth story not fool-proof and Euro zone going through its own difficult phase, it is difficult to state which currency will end up as reserve currency in the future, more so with China not allowing its currency to appreciate.