Market Overview

Currencies that George Soros Might Be Watching Today


George Soros, the guru of currency trading, made his name when he pocketed over $1 billion on a single day. That day came to be known in Britain as ‘Black Wednesday', when Britain was forced to devalue its currency and leave the European Exchange Rate Mechanism, a predecessor to today's single currency – Euro. From that day on, George Soros was referred to as “the Man Who Broke the Bank of England”.

In essence, George Soros was never a great admirer of the efficient markets theory. Instead, he believed the investors are often irrational, which can lead prices away from the fundamentals. Attacking an overvalued or undervalued currency has become Soros' specialty. Benzinga provides a list of currencies that might become George Soros' next targets.

First on the list is the Swiss franc (CHF). The Swiss currency thrives on the uncertainties in the rest of the world. The Swiss banks, along with its currency, have always been considered a safe heaven, a place foreign investors can run away to escape the problems in their own countries. There certainly is no lack of uncertainty in today's world and this has pushed the Swiss Franc to the near 5-year high against the US dollar, as well as against the main European currencies – the British pound (GBP) and the Euro (EUR). By the OECD estimates, the Swiss franc is 39% overvalued in relation to the US dollar and 32% against the Euro.

The question is how long will it take for the Swiss Franc to start going down. The simple answer would be as soon as the recovery in developed countries gains firm footing. There have been some indications that this is happening. The Swiss will probably raise little objections to the declining value of their currency, as the strong Franc is crippling its export-driven economy.

The second on the list is the Brazilian Real (BRL). The Brazilian economy and its currency have surged ahead during the presidency of an immensely charismatic and popular president Lula da Silva. However, with the transition of power to his heir Dilma Rousseff, not much has changed. The Brazilian real is still gaining on most of the major world currencies.

Brazil did avoid the worst of the American bubble bursting, but it might have been creating its own bubble in the process. The Brazilians did experience a fair share of booms and busts in their past. The Brazilian government certainly is not at all too pleased about the strong currency and has made efforts, albeit unsuccessful, to bring it down. So how long until the government gets what it wished for and the Brazilian real starts to go down?

Last but not least is Brazil's southern neighbor – Argentina. Like Brazil, Argentinean economy is booming in recent years and like Brazil, Argentina is struggling with its inflation. But unlike Brazil, Argentinean government is implementing ‘innovative' methods to contain the inflation – cooking the data. It is hard to be sure what is the real rate of inflation, but most independent analysts believe it is around three times the official rate, standing at around 10%.

It is widely known that the ‘love' between the Argentineans and inflation has reached epic proportions. With the government apparently in denial, what are the odds that another in a series of meltdowns of the Argentinean economy is on its way? In the last year the Argentinean peso (ARS) has lost almost 5% against the US dollar and over 10% over the Euro and the British pound. And this just may be the beginning.

This article may include mentions of rumors, chatter, or unconfirmed information. Readers should beware that while unconfirmed information may be correlated with increased volatility in securities, price movements based on unofficial information may change quickly based on increased speculation, clarification, or release of official news.


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