Published Wed, 09 Oct 2019 15:12:08 -0400 on Seeking Alpha
(Source - Pexels)
Over the past few weeks, I've been taking a deep dive into emerging market currencies. In "A Closer Look at Emerging Market Currency Instability" I detailed the driving factors behind the ongoing weakness in currency markets. Chiefly, excessive buildup U.S dollar and developed world denominated debt In E.M's that has created a global currency shortage and has spiked inflation in developing countries.
While this factor has caused a multi-year deterioration and has catalyzed the collapse of a few currencies, it looks to be ending shortly. I am still bullish on the U.S dollar, but I have taken profits on a significant portion of my position and am beginning to look for U.S dollar short investments. In "CEW: Look to EM Currencies for Dollar Hedged Real Yields", I explained how the E.M currency ETF (CEW) can deliver hedged value similar to gold, but with a nice yield around or over 2%.
If you're looking for the same hedged low correlation exposure but a higher yield, the VanEck Emerging Markets Local Currency Bond ETF (EMLC) may be a good option. The fund invests in local currency priced sovereign bonds in E.M's around the world (excluding China) and pays a very high yield of 6.5% after expenses.
Frankly, (EMLC) may be the only historically cheap bond fund I see on the markets today. Even more, it does not hold the high U.S inflation and interest rate risk than most far lower-yielding bonds. It is, of course, more volatile and, if the U.S dollar continues... Read more
Older articles featuring Cew (CEW):Dollar Real Yields Push USD Index Higher, Risk Appetite Recovery Puts USD/JPY On An Upward Path
Emerging Market Dividends: DEM Does Value
Investing For Income: Can Currency Carry Trades Replace Evaporating Yields?
1 Year Later: EMLC Comes Through for Yield Hungry Investors