Currency Trading

Could the world's currency of choice have the face of Mao Tse-tung on it, not George Washington? Quixotic or not, the Chinese are preparing for that day. In a series of what might be called baby steps, Chinese officials recently have moved to globalize the yuan and promote its influence overseas, with Shanghai designated as command central.

The Mexican peso plunged to new lows against the dollar Monday as global investors again rushed for the perceived safety of the greenback despite the horrid U.S. economy. The peso was trading at 15.47 per dollar for large transactions between banks, compared with 15.15 on Friday and 14.5 two weeks ago. Retail buyers and sellers would be quoted different rates, but the trend is the same: more peso weakness.

The super peso is back. As rising interest rates draw capital south of the border, Mexico's currency is trading near a six-year high against the U.S. dollar and is poised to crack the psychological 10-peso-to-the-buck barrier. The peso closed at 10.007 per dollar Wednesday, compared with 10.07 on Tuesday. The peso has gained about 9% against the greenback this year. The last time a dollar bought fewer than 10 pesos was October 2002. The pumped-up peso is making U.S.

The once-struggling U.S. dollar suddenly is the strongman of the world's major currencies. That's great for Americans' purchasing power -- but if you've noticed, it's a heavy blow to the foreign stock holdings in your portfolio. And because U.S. investors have pumped huge sums into foreign-stock mutual funds in recent years, this turnabout in the dollar may be much more painful for your nest egg than previous rallies in the currency.

Foreign stocks had been the shining stars in many U.S. investors' portfolios from 2003 through 2007. This year, they're beginning to look like black holes. With the global economic outlook fading and the dollar rebounding, Americans' foreign holdings are suffering a double-whammy. If you haven't checked your portfolio lately, you may be in for a shock. The average foreign stock mutual fund has plunged 18.1% year to date, according to Morningstar Inc. That's more than double the 8.

The U.S. gave the world the worst financial crisis since the Great Depression. In return, global investors reward us by dumping their own currencies in favor of the dollar. Make sense? Although the greenback fell slightly Thursday after weeks of soaring against most of its major and minor rivals, the world's hunger for the U.S. currency shows no serious signs of abating. The euro plunged Wednesday to a two-year low of $1.285, from $1.313 on Tuesday.

T\o7o\f7 protect the purchasing power of your money over the last five years, one of the best strategies was to send it abroad. Foreign stock markets overall have risen faster than U.S. shares since 2002. And a big bonus for American investors in foreign securities has been the currency effect: As the dollar's value has sunk against many of its global rivals, returns earned abroad have been juiced significantly. To appreciate just how friendly the dollar has been to U.S.

Weak dollar, strong dollar. It's both, depending on which foreign currency the greenback is measured against. Here's how the dollar is faring this year against some rivals: * The euro: The currency shared by 13 nations including Germany, France and Spain has been on a hot streak since January. It hit a record $1.368 on April 27, up from $1.32 at the start of the year and $1.26 a year ago. On Friday the euro was worth $1.36.

That sinking feeling is back for Americans traveling abroad. The dollar fell to a 26-year low against the British pound Monday and also tumbled against the euro, the Canadian dollar and other major rivals. Currency traders said the market was again focused on the likelihood of stronger economic growth and higher short-term interest rates abroad compared with the U.S. Higher rates tend to attract global investors, bolstering a country's currency.

The Japanese yen suddenly is the strongman of global money. The yen rocketed against the dollar, the euro and other currencies Thursday amid an unwinding of the so-called carry trade -- investors' use of low-cost loans in Japan to fund purchases of investments worldwide. The carry trade has been a favorite strategy of hedge funds and other big-money players for years.