Friday morning, CNBC's resident Archie Bunker character, Mark Haines, bemoaned the further fall of the dollar against the euro, complaining that, "We just can't catch a break here. Never good news."
Folks, currency movements aren't a matter of luck. If you invest heavily in international stocks like I do, you have to pay attention to currency cross-rates and the fundamental factors that move them.
You can spend hours poring through huge boring textbooks on what supposedly makes currencies move. Or talk to the traders who bet millions on half-cent moves for another perspective; they're too busy to read books, they just listen to the headlines and react as fast as they can. Fire, ready, aim.
I don't spend my time buried in macroeconomic analysis. The average investor in international equities doesn't need to either. You just need a basic understanding of what makes a sound economy, and which countries and regions are doing a good job in that department. Chances are, their currency will follow.
The U.S. gets a gold star for long-term growth and job creation, and a Bronx cheer for poor savings rates, budget deficits, and trade deficits. The world props up the dollar because we keep buying their exports. Can that game go on indefinitely? Not likely, but don't bet on it changing drastically in the short run.
Europe deserves top grades for personal fiscal responsibility and regional trade surpluses with the rest of the world, and rotten marks for job creation and a business climate that encourages innovation and growth.
Asia is the best growth story so far this century. China and India lead the way with screaming GDP growth and huge upside potential from here. It's no accident that the Asians are responsible for buying up more and more of our U.S. dollar debt. That's where we send most of our dollars to buy stuff.
Africa continues to struggle economically. South Africa has the potential to be a bright spot but the ups and downs there produce 10%-20% swings in the rand, a harsh tonic for individual investors to swallow.
Put all that together and you start to understand why the dollar has given up so much ground the last few years. Americans like to spend and consume, far beyond their ability to pay for it. Sooner or later, fiscal recklessness weakens your currency.
Europe may be stodgy and mired in old welfare states, but their good fiscal habits paid off in a stronger euro. The Asian currencies should also follow their growth and prosperity upward.
How can you play the general decline in the dollar? The simplest way is broad ETFs like the iSharesMSCI EMU Index Fund
The world's desire to keep us addicted to buying their stuff has moderated the negative impact on the dollar somewhat, but the long-term trend is inexorable. Luck has nothing to do with it.
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Fool contributor Dale Baker, a private client portfolio manager and former U.S. diplomat with extensive experience in Europe and Africa, keeps much of his portfolio and his clients in international stocks. He welcomes your questions or comments.