The decline of the US dollar on the world's currency stage shows no sign of being reversed any time soon, analysts predict.
'We have now seen a substantial devaluation of close to 30 per cent since the dollar's peak in 2002/03, which is quite an adjustment,' Nomura strategist Sean Darby tells Net Worth.
'Going forward, if the US Federal Reserve continues to cut rates the dollar is not likely to garner much fund flow and Asian currencies will continue to strengthen,' he adds.
Investors can bank on this trend by keeping faith with Asian equities, analysts say, though portfolios might be weighted in favour of companies that earn more of their revenues at home rather than abroad - in particular from exports to the US where consumers have ended a five-year shopping spree and the economy is in danger of tipping into recession.
Cuts to US interest rates by the Federal Reserve - aimed at preventing a recession - partly account for the dollar's renewed decline and the move on October31 to cut its Fed Funds rate by another 25 basis points to 4.5 per cent, following a rare 50 basis point cut in September, helped the greenback to record lows against its major rival, the euro which rose to US$1.4438, the highest since its 1999 launch and taking its year-to-date gains to almost 10 per cent.
'Looking ahead we would like things like reits generally, but specifically in Japan and Singapore; and also telecom stocks which are domestically focused, cash generating, have good earnings qualities and few concerns regarding commodity prices,' Mr Darby says.
The advice is similar to that given by UBS economist Edward Teather, who last month forecast in a research note to customers of the Swiss-based investment bank that Asian economies would continue to prosper despite the downturn in the US economy, and that their currencies would continue to strengthen against the dollar.
