Investing in Asian Currencies

There's no doubt that investing in Asian currencies is especially appealing. It's undeniable that we now live in a fully global market. As a result, international diversification of assets is the ultimate boon to the investor. Here's how you can take advantage of the appreciation potential and risk mitigation offered by Asia's best currencies.

About Asian Currencies

Asian currencies are currently a world unto themselves. Many Asian nations are experiencing solid economic growth at a time when the United States and Europe are deeply embroiled in a financial slump and worrying debt crises. This phenomenal expansion in the Pacific region is fueling stronger currencies across the continent, and the effect is even more dramatic due to outside factors. No one can deny that Western currencies like the US dollar and Euro are suffering.

Surprisingly, the most steady currency appreciation has recently come from unexpected places. Currency units from India, South Korea, Malaysia, and elsewhere in the South Pacific have experienced strong gains against the US dollar. Meanwhile, the economic behemoth embodied in China's Yuan continues its upward motion at a slower rate, and potential issues like material demands and housing surpluses cloud the horizon. The Japanese Yen remains weak since the home islands were hit by natural disasters early in 2011.

Fortunately, investing in most Asian currencies offers a number of advantages. Putting your cash in a diversified basket of these currencies gives you excellent diversification and protection against weaknesses in Western economies. In the US and Europe, economic recovery remains tentative at best, and it shows in their monetary policy. Inflation is a serious threat to US dollars and Euros due to Central Bank practices designed to keep interest rates at historic lows to encourage lending.

In Asia, inflation is occurring as well, but significant currency devaluation is far less likely. The steady uptick in economic activity means Asian banks are more likely to raise interest rates. This keeps inflation in check, ensuring that Asian currencies benefit from fundamental strength without losing value due to inflationary erosion.

How to Invest in Asian Currencies

Getting into Asian currencies has never been easier thanks to changes in asset trading over the last decade. No longer do you need a professional broker to buy currencies from across the Pacific region. Exchange Traded Funds (ETFs) are a safe and easy way to begin investing in Asian currencies. Many ETFs are based around specific currencies, while others divide your cash among many different Asian currencies.

Moreover, the average ETF is highly liquid, meaning you can easily buy and sell them. Unlike traditional mechanisms for investing in currencies, this allows you to seize advantages of market trends, without subjecting yourself to lost profits from trading volatility. Asian currency ETFs are typically available from major mutual fund managers like Vanguard, Fidelity, Schwab, and more.

As investors pour money into stocks, bonds, and commodities, currency diversification is often overlooked. This is a shame, since investing in Asian currencies provides one more opportunity to enjoy greater protection of your wealth and added growth potential.