And The Safest Currency Of The Year – CNY or USD ?

Indian Rupee down 1.98% today but I believe the typhoon was in Philippines. Indonesia bucked trend with their surprise rate hike. Thailand considerably unfazed by their Amnesty bill.

For the month of November, US dollar reigns supreme. For the months since May and the EM crisis, US dollar reigned supreme. And year to date, US dollar reigned supreme.

Out of curiosity, I decided to rank all the currencies of the world against the US dollar for the year and voila, the best performing currency since Jan this year has been the …… SOMALI SHILLING ! Up 30.7% ! Next closest is Seychelles Rupee up only 8.93% followed by the Uganda Shilling up 6.39%.

Talk about scarcity value.

There is no scarcity value for Iranian Rial (-50.63%), Syrian Pound (-49.48%) or Venezuelan Bolivar (-31.74%).

In our little corner of the world, the choice is clear – China with her slow and steady gains since January with the Chinese Renminbi attaining a historic high against the USD not seen since pre 1994’s devaluation exercise.

USD/CNY CHART

The entire world, since the 2008 Lehman crisis, has been fixated on competitive devaluations to boost profits. Abenomics is the latest grand scheme this year which has seen the JPY depreciate 13% and we note that Indonesia and India had to do nothing to get their devaluations except be themselves.

If we look ahead towards the US Fed Taper, there is no precedence for what is about to happen even though we had a teaser in May which rocked and spooked the EM world. That will happen again, no doubt, even as central banks are raising their defense barriers such as the Indonesian rate hike today and India’s plague of reforms last month. The CNY is unlikely to be spared in the initial onslaught.

For me, it is a toss up between USD and CNY – both still growing and inflating. EUR and gang are running into their own problems with latest deflationary fears, unemployment problems and dependence on FDIs. The EM story is disintegrating for all the cracks that were glossed over in the frenzied post Lehman years of yield hunting.

And if I had to choose, I would take the USD.

1. China is still on a shopping spree in the US for hard assets
2. US is now an oil producer and
3. All that QE money has to go home.

Pity that when I wrote this, I initially had CNY in mind.