How about when your a commodity-based or emerging market currency shows some glimmer of strength. Central banks in Asia and New Zealand are trying to cool off their currencies as capital continues to flow to those areas.
Despite concerns about a global slowdown, Asia in the minds of many investors is where whatever growth exists is. Horace Mann may have said to go west, but it's by all indications now east, China, Thailand, Australia and the Philippines.
The Thai baht is approaching levels not seen since 1997 when it moved around 25 baht to the U.S. dollar. Though it's early this is another form of what some might call reverse currency debasing.
As these currencies strengthen those of some of their trading partners weaken. That could end up making products from these strong currency nations less marketable putting a damper on exports.
When a similar situation among the so-called Asian Tigers developed in the 1990s, central banks tried to stem the tide by intervening in the markets. And we all know how that came out. Fooling around with currencies is like fooling around with Mother Nature. You might get away with it for a while.
According to reports Asian emerging markets have attracted nearly $7 billion to bond funds so far this year. Last time that happened was 2010. This is at least in part a higher return thing. Yield hungry investors searching for more income.
The message is also clear. Money looking for higher returns will travel. It reads like a good telegram: Have money. Need higher returns. Will travel.
What happens after it gets there determines whether the trip was worth it.
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