The Japanese yen has dropped 6% to 106 per U.S. dollar since Prime Minister Shinzo Abe won a crushing election victory last weekend and ordered a new round of stimulus. Chris Gaffney, president of world markets at EverBank, said the Japanese currency could fall another 5% before the end of 2016. “The yen has been the beneficiary of dramatic safe haven flows, but really doesn’t have much going for it besides being one of the globe’s most liquid currencies,” said Gaffney. In Gaffney’s view, currency investors are on a search for yield so some of the best opportunities in the currency markets are going to be those currencies which have a ‘positive carry’ like the Brazilian real and Russian ruble. “The Brazilian real and Russian ruble are interesting as their high interest rates continue to attract investment flows,” said Gaffney, adding that longer term investors should consider the Indian rupee because it has “both a decent interest rate and fairly strong supporting fundamentals”. The Norwegian krone is another long term favorite of investors at EverBank Global Markets, with solid economic fundamentals and a good current account surplus, budget surplus, and debt levels, according to Gaffney. Precious metals have started off the year with some of the best returns of any of the asset classes. Investors moved back into gold, up 25% year-to-date, and silver, up 43% this year, on safe haven buying at the beginning of the year and again after the Brexit vote. Considering the continued uncertainty in the market, Gaffney said precious metals should continue to see safe haven buying for the remainder of 2016. But even if market volatility calms, he believes there is a compelling case to add precious metals to portfolios due to the low rate environment and the massive monetary stimulus being pumped into the markets by the major central banks. “I always prefer investing directly into the precious metals, as it provides better catastrophe insurance in the case of a global meltdown but investors can also play the metals via the gold and silver ETFs,” said Gaffney, adding that a metals purchase plan utilizing dollar cost averaging is a great idea for investors who haven’t already started accumulating a position in gold or silver.
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