Thursday, July 2, 2009

Dollar Suffers Biggest Loss Since 1999 vs Real.

In Q2 2009 the US dolar suffer its biggest quarterly loss since 1999 versus the Brazilian Real. On May 1st of this year the exchange rate was 2.29 (1 USD = 2.29 Real). On June 30, the same exchange rate was 1.95. Yesterday the dollar fell further to 1.93.

The following chart shows the quarterly performance of the USD versus the Brazilian Real since 1999.

(Please click to enlarge)

The Brazilian Real is rising due in great part to the strength of Brazilian exports and increases on prices of commodities which have caused the Brazilian trade surplus to increase. In June the surplus was USD $4.6B.

Why this matters to US investors? Because the huge US debt may never be repaid. The only way to take care of the debt is to devalue the currency, either through inflation, or by a change of currency. Cash and money markets may not be safe. The safest investments are on growing and stable economies with strong surplusses and rising currencies, not under the mattress. This is extremely important and will be the subject of future posts.

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Deming said...

And Brazil's number 1 export country is now China.


The Shocked Investor said...

That's right, and Brazil and China are in talks of bypassing the use of USD altogether in their trades.

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