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Templeton Emerging Markets Inco Message Board

  • Pswartz1 Pswartz1 Nov 19, 2003 11:34 PM Flag

    If The Dollar Goes Down A Lot More....

    Suppose the dollar depreciates a lot another 20-30%....then how badly will the SE Asian economies get hurt?...and the Templeton Funds, like GIM, TEI, TDF and EMF?? A very weakened dollar is not territory I'm familiar with, and it's difficult (for me at least) to have much of a feeling for the fallout, except that I think it will not be good, mostly because export trade to the US will be noticeably constricted. Hate to say this, but it is my gut instinct that the dollar has yet a long road down.....(so where is there a safe haven???)

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    • A continuation of the weakening dollar is a very high probability, given the massive twin deficits in the current account and the federal budget. Unlike the late 1980's, this time around we do not have a Plaza Accord for an orderly decline in the dollar. The export oriented Asian economies such as Korea and Taiwan will be impacted, but India will do just fine, given that it exports very little to the U.S.. The foreign closed-end bond funds will do well, since their bond holdings will appreciate in US dollar terms. The foreign closed-end equity funds will be impacted by lower earnings at the big exporters.
      An interesting point about the declining dollar is that commodities are priced in US dollars, so for example, oil becomes cheaper for Europeans, as the US dollar falls. Gold works the same way, which is the main reason that gold has risen in dollar terms. When measured in other currencies, gold has not performed nearly as well.
      My major investment theme, over the last 15 months has been the weaker dollar and I have been loading up on FAX, canroys (stopped buying in April), gold equities and non-precious metal mining stocks (RTP, BHP). Another route is to invest in the foreign currency CD's offered by Enerbank

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