Why Might This Be Occurring?
First, the commodity prices of the past several years, which were indicative of a combination of oversupply and economic weakness, have begun to turn. It appears that while the global economy isn't at full steam, it may have shifted out of first gear for the first time in years.
Second, the U.S. economy is no longer the only one showing some signs of resilience. Even the Eurozone, long dragged down by the outlier countries, is showing positive signs of growth.
Finally, at near zero interest rates across the board there is only a nominal yield advantage to holding funds in U.S. dollars. The U.S. 10 Year Treasury Note has fallen over one-half of one-percent since the first of the year and is again creeping downward.
So What to Do?
For years we have suggested that people consider diversifying a portion of their portfolios in foreign currencies. I maintain some level of exposure all the time. We also suggest expanding that allocation if the individual believes that a weak U.S. dollar trend is taking hold.
Today, specifically, we are watching a combination of first and developing world currencies deeply involved in the production of commodities, including a long-time favorite Australia, our NAFTA partners Canada and Mexico, Chicago School favorite Chile, and, finally, South Africa. All have a few blemishes but all have great possibility.