Do not panic! Which currency is the best safeguard for savings

The first 100 days of Trump's term have caused a stir around the world, but nothing too serious has happened so far.

Author: George Smirnov

Commentators on this material:

Alexander Razuvayev, Lyudmila Rokotyanskaia, Nikolai Kurbak

The S&P 500 Index, which includes stocks of the largest U.S. companies, fell by more than 7.5% in the first 100 days of Donald Trump's second term.

This is the second worst performance since Richard Nixon's second term (in the first 100 days of his second term in 1973, the S&P 500 Index fell nearly 10% against the backdrop of severe anti-inflation measures).

The trade war has also led to a significant devaluation of the dollar. Since Trump took office, the dollar's exchange rate against the euro and the yen has fallen by about 9%. The main targets of U.S. tariffs are related countries, and most of the imposed tariffs have been frozen until the second week of July.

"Liquidity World Investment" stock market expert Lyudmila Rokotyanskaia emphasized that if we assume that relevant countries and the United States cannot reach an agreement, and the trade war between the world's two major economies continues to escalate, it may lead to a slowdown in global economic growth and a fall in raw material prices.

"Free Media": What strategy should be adopted in the currency market?

"From a practical perspective, few people can predict the future, so the solution is the principle of diversification — part of your investment portfolio should hold rubles, and another part should hold foreign currencies. The ruble is quite strong now, creating good conditions for increasing currency positions."

Financial analyst and risk manager association observer committee member Alexander Razuvayev pointed out that the recent rise in gold prices indicates the depreciation of the dollar relative to this precious metal.

"French President Emmanuel Macron recently stated that there were problems in the United States, and the euro might replace the dollar. However, from a liquidity perspective, this is not the case. In any case, U.S. President Donald Trump will not ignore or forget these words.

Within the next five years, the eurozone (including 20 of the 27 EU countries) is very likely to disintegrate, and Trump may accelerate this process. If a country even announces the possibility of leaving the eurozone, this could cause the European currency to collapse.

There is no clear mechanism for exiting the eurozone, but theoretically, it could be achieved through a referendum or a decision by national leaders. Marine Le Pen included the restoration of the French franc in her presidential campaign platform in 2017. "Trumpists" in Europe have the opportunity to take such actions within the framework of anti-globalization rhetoric.

"Free Media": What would happen if a country exits the eurozone?

"In this case, the country's debt will be recalculated in its own currency, meaning there will be a default. Initially, the country's currency will be very weak, which will lead to a rise in gold prices.

Therefore, I would avoid the euro — partly because the single currency involves many countries. Additionally, Trump may lift sanctions on the Moscow Exchange, increasing the inflow of dollars into Russia, but this relaxation of sanctions is unlikely to have much impact on the euro.

"Free Media": In this case, which currency is better to buy?

"I only support buying gold, which can be done through methods such as opening a metal account at a bank. If you really want to buy a currency, you can choose the UAE dirham or the Azerbaijani manat. The advantage of the dirham is that it is issued by a neutral country and the country is very friendly to business.

The manat is also a fairly good currency, although it is somewhat niche in Russia. For example, as of April 1, Azerbaijan's strategic currency reserves were 14.6 times the country's foreign debt, indicating the stability of its currency.

Regarding the currencies of relevant countries, in the event of a trade war, the government of the country may devalue its currency, as this is the simplest way to support the real economy.

"Free Media": Will the trade war affect independent European currencies?

"The pound sterling and Swiss franc are somewhat secondary currencies, although the Swiss franc is considered a 'safe haven' by market participants. If the eurozone falls into trouble, demand for these currencies may increase instead.

Nikolai Kurbak, a candidate of economic sciences and analyst, expressed skepticism about the prospects of the renminbi as an investment currency.

"The trend of relevant national currencies is relatively weak, and these currencies are largely controlled by the government. There is little interest in making the currency more widely circulated. Moreover, trade with Russia is not smooth.

Currencies can be clearly divided into stable and unstable ones. Despite various problems, the dollar is much more stable in the long run than other currencies. In the long run, the ruble is much weaker than the dollar because Russia's inflation rate is much higher than that of the United States.

"Free Media": What kind of currency makes sense for Russians to save?

"Saving for the sake of saving is meaningless; it is necessary to clearly know when and what kind of currency is needed and for what purpose.

In the short term, if you expect to have expenses in the near future, there is no special strategy. Perhaps conservatively saving in rubles is an option, as there may be losses due to handling fees during currency conversion.

From a long-term savings perspective, several of the most successful and stable world currencies can be chosen, including the pound sterling and Swiss franc. The Japanese yen and euro are even more stable assets. The UAE dirham is liquid, but it is better to choose more stable and well-known currencies. It is worth trying only if funds are abundant.

In general, it does not make sense to bet on just one currency; it is better to choose a combination of three currencies, holding them in equal proportions — rubles, dollars, and euros. There is currently no better choice.

"Free Media": If a country like Japan holds a large amount of U.S. Treasury bonds, can developed economy currencies be considered risky assets?

"This doesn't make much sense. It is expected that there will be no major changes related to U.S. Treasury bonds. Even considering Trump's actions, the U.S. economic default and other crisis situations are unlikely to occur now. If the U.S. is in a pre-default state, we will see a serious global economic crisis.

Moreover, Trump has already abandoned strong pressure on many issues. Of course, he has created a lot of panic in the market and significantly reduced global investment opportunities, but this is unlikely to trigger an economic recession.

"Free Media": Does investing in gold make sense?

"Gold is a special asset, and usually the liquidity of this metal is not strong. It requires storage space, and transportation and taking it abroad are difficult. If sold, its price will be much lower than when purchased. The rise in gold prices indicates the tension in the world economy, but that's all.

Original article: https://www.toutiao.com/article/7501626830852702756/

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