PEACHTREE CITY, GA--(Marketwire - March 11, 2009) - Hyperinflation, the scenario in which
prices skyrocket while the value of currency falls, could be the next in a
series of risks to the U.S. economy -- but it would create opportunities
for traders, says a forex expert. It would give these traders the
opportunity to profit by selling the U.S. Dollar (USD) and the Japanese Yen
(JPY) -- the two currencies most likely to be devalued.
"If the stock market recovers in the second half of 2009 -- ahead of an
economic recovery -- the rise in share prices in a low interest-rate
environment could spark hyperinflation," says
Wayne McDonell, Chief
Currency Coach of FX Bootcamp (
www.fxbootcamp.com), a live Forex training
organization, and author of
"The FX Bootcamp Guide to Strategic and
Tactical Forex Trading" (Wiley Trading, September 2008).
If hyperinflation emerges, investors should consider responding by selling
the U.S. Dollar (USD) and Japanese Yen (JPY), Mr. McDonell says, because
rising U.S. share prices in a slow growth environment will create an
oversupply of USD and drive down its value. The Japanese economy will
follow a similar profile.
According to Mr. McDonell, the Federal Reserve is unlikely to raise
interest rates until an economic recovery is farther along. The Bank of
Japan has raised interest rates too quickly during their economic recovery
and thus put Japan back into a recession. The Federal Reserve is aware of
this and will lag even more. "The Fed doesn't react to the market and only
adjusts interest rates based on economic data. That means there will be at
least a 6-month lag between the two," he says.
Mr. McDonell warns traders to watch for a scenario in which the following
happens simultaneously:
- The stock market recovers and share prices surge.
- The Fed continues to hold interest rates at or near zero while
it waits for evidence of an upturn in the general economy.
- Inflation skyrockets as higher share prices put more money into
circulation -- but it loses value instantly because of low interest rates
and a slow economy.
- U.S. Treasuries fall and gold prices spike as investors seek
stock-market returns and inflation hedges.
- The USD and the JPY plunge as investors move back into stocks.
Currency traders should be ready to sell early, as first signs of
hyperinflation appear, Mr. McDonell says.
If these events occur, investors can profit by selling USD and JPY and
buying gold. To not miss the boat, traders should be disciplined about
watching for signs of hyperinflation -- such as an upward move in share
prices while economic activity and interest rates remain low -- and be
ready to act.
"The good news is that investors can profit on bad economic news," Mr.
McDonell says. "Currency trading is affected by the economy but doesn't
depend on it. That means bad economic news can be good news for traders --
provided they anticipate possible developments and have strategies in place
so they're prepared to act."
Wayne McDonell is available for interviews. For more information, or to
schedule an interview, contact Itay Engelman of Sommerfield Communications
at (212) 255-8386 or itay@sommerfield.com.
About Wayne McDonell
Wayne McDonell is the Chief Currency Coach of FX Bootcamp, a live forex
training organization, which has an audience comprised of members from over
50 countries. He is also the author of
"The FX Bootcamp Guide to
Strategic and Tactical Forex Trading" (Wiley Trading, September 2008),
a top seller in the Foreign Exchange category. Mr. McDonell is a regular
speaker at major investing conferences, including the upcoming Traders Expo
in New York. He provides his weekly trading outlook on FOREX Television and
his training videos are syndicated around the world on outlets including
FXstreet.com, MoneyShow, DailyFX, Yahoo! Finance, MSN and others. As a
professional forex trader, Mr. McDonell is a member of the National Futures
Association and a registered Commodities Trading Advisor.
Contact Information: Contact:
Itay Engelman
Sommerfield Communications
(212) 255-8386
itay@sommerfield.com