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Why experts prefer new currencies



Investors should look at buying new currencies against US dollars, two analysts told Monday.

These calls come as the US Federal Reserve seems to consider seriously reducing US interest rates. As dollar-based investments start to give less interest, it can weaken the dollar against the currencies of higher-interest countries – including many in developing countries.

"What we see now is that the dollar is likely to be peaking against a number of the new currencies," said Mike Ryan, US Investment Manager at UBS Global Wealth Management.

"We believe there is a basket of emerging market currencies that looks appealing when the Fed is ready now to start cutting rates as opposed to raising rates," he told CNBC's Street Signs . "

This does not signal broad-based US dollar weakness, he added, noting that other developed countries central banks also want to swing on rate policy.

Khoon Goh, head of Asia research at ANZ Bank, echoes that view.

"We have already eased those (Australian and New Zealand central banks) so I think we are in this situation where the carrier will be back in fashion," he told CNBC's "Squawk Box".

The term "carry trade" refers to a strategy where investors borrow in a low interest rate currency to buy assets in a higher interest rate currency. In this way, they can make money from their investments in another currency while paying less interest on the borrowed amount.

Goh said ANZ continues to favor some currencies in Asia such as the Indian rupee and the Indonesian rupiah. Benchmark interest rates in India and Indonesia are 5.75% and 6%, respectively, compared to Fed's 2.25% and 2.5% goals by Business Economy.

The dollar-index image is "a little more muddy", but it is clearer for high-performing currencies in countries with a "compelling growth history" or the possibility of economic reforms that will spur foreign influences, he added.


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