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 When you want to see which currency could be the “top performer” when things recover, you want to see who got crushed the least fundamentally. I often say it this way. Who won the “least ugly contest”?

Now in a global downturn a currency won’t usually go up based off of its fundamentals, just like a stock won’t always go up in a bear market just because it still makes money. Usually, it gets dragged down with the rest of the pack.

Well, the same has happened here with this currency: the Aussie dollar

It’s had better fundamentals than ANY of the major currencies out there, yet it’s gotten crushed along with the rest of the pack. However, when a recovery is in sight (even before it starts to happen), currencies with the best fundamental underpinning stand the best chance of going up first.

When the CEO asks Why you Invested in a Currency, You’d better have a Good Answer Ready!

You see, big hedge funds and interbanks invest big chunks of money (called yards, which are a billion units of currency) at a time. If these money managers invest large sums of money into a currency and they are questioned by their CEOs as to why they took on the position, they’d better have some rock solid fundamental data to throw at them. Otherwise, they may be looking for another job!

I personally believe that the worst of the recession is over. Notice I didn’t say that the recession was over, but just the worst of it. By that I mean that we are on the “backside of the recession”. We’ve gone through the trough of the recession and now are beginning to go down the slow, bumpy road towards economic expansion. It will take time before we actually reach “economic expansion” globally but we’re starting to head in that direction.

I feel that the “big money” knows this too and this is why they are starting to accumulate positions again in currencies that benefit from an economic upturn. They have to do this a bit ahead of time in order to get the great “discounted” prices that these are trading at. If they were to wait until the economic recovery were underway, all of the greatest discounts in the pricing of the currency would be gone.

Here’s what makes the “Land Down Under” so Special!

So...why Australia? Aren’t they just a country of barren land, kangaroos and Crocadile Dundee? No, actually they are kicking most of the world’s butts right now economically. Let’s look at the graphs below and you will see what I mean.

To the far left you will see the interest rates that the major currencies yield. Notice that Australia and New Zealand lead the pack here by earning 3%. However, what comes next is where Australia even separates itself from New Zealand and others as it “pulls further away from the pack”. The middle column shows the inflation (CPI) rate annually in each country. Australia comes in at 3.7% while New Zealand comes in at 3.4%. In the last chart, you will see the GDP growth. This shows how quickly an economy is expanding or contracting. Here’s the kicker. Austalia is the ONLY one left in economic expansion (0.3%) right now. Every other country is backpeddling in economic contraction currently. While they aren’t expanding by a ton, look at how badly most everyone else is contracting!

Australia “Hops” over Every Country Economically!

What does a high interest rate do for a country’s currency? It attracts money to it as “money seeks high yields”. Why does higher inflation help a currency? Because high inflation has to be fought off with increasing interest rates which again...money seeks high (and increasing) interest rate yields.

Why does a country benefit from GDP growth? Because an expanding economy is a vibrant economy and any currency investor is more comfortable investing in a thriving, growing economy than they are that of a contracting economy. ( I picture this like choosing to buy a stock that makes money and has expectations that it will expand its earnings growth vs. one that is starting to make less money or even lose money in their business.)

So with these important “fundamental truths” going in  Australia’s favor, it’s a reason why investors all over the world need to look seriously into the #1 major currency in the world (fundamentally).

AUD/USD and AUD/JPY Should Move Higher in the Weeks/Months Ahead!

As times get better, the picture will only get brighter for the “land down under”. This is why I believe that AUD/JPY (Australian dollar vs. Japanese yen) and AUD/USD (Aussie vs. U.S. dollar) will prosper in the coming months to year.

Now, we’ve only talked about the “tip of the iceberg” currently. If you want to learn more about things like this and how to gauge a currency fundamentally and technically (from the charts), then you will want to check out our Currency Investing course which goes into this in great detail.

You will have real life currency traders there to answer your questions on the online forums. They are there 24 hours a day, Monday morning through Friday afternoon. You can learn about another way to diversify your portfolio and get your direct questions answered from professionals who’ve been doing this for a very long time.

Oh, and also there’s a money back guarantee if you aren’t completely satisfied...all for $19.99.

So check out our Currency Investing course, here. You can also get a FREE, real time demo trading station to see how these currencies trade. The quotes and charts are free and in real time. So download your demo today so you can see what I’m talking about for yourself. Download it here.

Then once you’ve completed your course and played around with the real time demo executing your demo trades, you will be ready for your live account. Bookmark this link so you will know where you can obtain your live account.

Sean Hyman

Contributing Writer

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