By Carl Delfeld of the Chartwell ETF Advisor and ETFfolio.com
ETF investors need to be aware that inflation in the Asia-Pacific region is creating upward pressure on two key currencies. What will be the impact on exchange-traded funds that track markets in the region?
The Australian dollar surged to a three-month high todays as speculation grew after a Reserve Bank of Australia’s policy meeting that further interest rate rises are on the horizon. The central bank raised interest rates by 25 basis points to 7% at its meeting earlier this month in an attempt to stem domestic inflationary pressures. The Australian ETF (EWA) responded positively in trading today, up nearly 2%.
Meanwhile, China recorded an inflation rate above 7 per cent in January – the highest in more than 11 years causing concern and raising the lilelihood that its currency would continue to strengthen to combat inflation. The National Bureau of Statistics on Tuesday said that inflation surged to 7.1 percent from 6.5 percent in December. Producer prices hit a monthly high of 6.1% - the highest in three years - due to winter storms, resulting transportation problems plus higher commodity prices.
The yuan has risen by about 13 per cent against the US dollar since mid-2005 but increased at an annualised rate of about 20% in January.
How are Chinese exports doing in light of the stronger currency and how should your global ETF portfolio be adjusted to take advantage of these developments? You need Chartwell ETF.
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