The news of the death of the "ZIMDOLLAR" will spread this week beyond the research quarters of Wall Street firms to Main Stream America. Massive spending fueled the obliteration in the value of the Zimbabwe Dollar and historic inflation. So much so that the government has planned a funeral for their own currency and moved toward the US Dollar and South African Rand.
This is a classic example of how critical currency exposure is for diversification in an investor's portfolio. Pick your own investment tools folks, there are plenty out there, but look at currencies.
Analyzing the larger global economies, one of the standouts has been the Australian Dollar. Up over 15% this year, "the down under" currency is buoyed by its domestic exposure to providing China with the resources it needs to grow.
The Australian equities market is a top 3 performer year-to-date and has largely avoided the credit crisis that sent our own domestic economy into a tailspin. Looking forward, the RBA, the Aussie central bank, will be one of the first to "take away the punchbowl" and move to tighter monetary policy. Why? Because they can! Their balance sheets are clean and their economy may be one of the first to recover.
Whether it is exposure to Aussie equities or the currency itself, investors may want to look "down under" at the resilient Aussie economy as a viable investment theme.
Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic and market risk.