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If they're so tired of a depreciating currency, they can use gold
Fund Managers Look Beyond the Dollar for a Base
By Peter Garnham
Financial Times, London
Friday, April 1, 2011
http://www.ft.com/cms/s/0/2c6a71a4-5c4c-11e0-8f48-00144feab49a.html
In an increasingly open global economy, fund managers say some clients do not have a base currency and do not want their portfolio performance reported in dollars.
This forces funds to hold assets in a currency that many believe is a one-way downward bet, given the profligate fiscal and monetary stance of the US, the custodian of the world's largest reserve currency.
The euro, the next largest reserve currency, also has its detractors. The single currency has been extremely volatile in recent years as fears over the fiscal health of countries on the periphery of the eurozone have led some to question the very existence of European Monetary Union.
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Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon
Company Press Release, January 18, 2011
VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.
PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.
Following the transaction:
-- Prophecy will own approximately 90 percent of PCNC.
-- PCNC will consolidate its share capital on a 10 old for one new basis.
-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.
-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.
Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.
For the complete announcement, please visit:
http://prophecyresource.com/news_2011_jan18.php
This has led some to call for an increase in use of a basket of currencies as a gauge of performance, a development that could help to reduce the dependence of fund performance on the fortunes of one particular currency.
Indeed, John Normand, head of currency research at JPMorgan, says this approach makes sense.
"It doesn't matter what currency you report in. There is a huge choice," he says. "You want your assets where you have liabilities. Whatever currency you report in, it does not change the fact that you will need to buy a certain currency to import some goods or pay a debt."
For funds with less than $250 billion under management, analysts say, the currency world really is their oyster, with little limit on the currency in which to hold their cash.
It is when funds exceed this size that liquidity becomes a problem, given the limitations in the size of securities markets outside the world's major economies.
Despite the growth seen in the emerging world, this leaves larger funds in the thrall of the economic policies of the largest economies, in particular that of the world's dominant financial force: the US.
Analysts say the dominance of the dollar as the world's reserve currency is unlikely to be threatened in the near future despite misgivings in certain quarters that the US authorities are engineering weakness in their currency.
The weakness in the dollar, which according to International Monetary Fund data accounts for about 60 per cent of the world's currency reserves, has accordingly caused alarm among the fund managers of the globe's largest reserve holders.
Indeed, China, which at $2,900 billion sits on the world's largest currency stockpiles, and Russia have called for greater use of special drawing rights in global reserves. This is a synthetic currency maintained by the International Monetary Fund that represents a basket of the dollar, euro, sterling, and yen.
Research from the IMF, released in February, said the dollar's haven status had been confirmed during the recent financial crisis and that the US currency would remain the world's most important global reserve currency for the "foreseeable future."
The paper noted, however, that a greater role for the SDR would reduce currency volatility and would ensure that countries have easier access to foreign exchange funding during a crisis.
For their part, US policymakers do not seem flustered by talk of an increased role for the SDR.
Tim Geithner, US Treasury Secretary, told US lawmakers early in March that he remained confident the SDR was not capable of usurping the dollar's reserve currency status.
Mr Normand says he can understand investors' qualms over the dollar given the inflation and fiscal risks in the US.
"The idea is that reserve currencies can retain value and retain liquidity," he says. "Of those two, the dollar is only guaranteeing the second."
He says, however, that given the level of global reserves, there are really only two other currencies that have large enough bond markets to offer an alternative to the dollar for the largest reserve managers: the euro and the yen.
Mr Normand says the idea that the SDR could fill the void was a non-starter.
"To enable the SDR to become a reserve currency, authorities would have to issue securities of equal value to the entire US Treasury, European and Japanese bond markets," he says. "That is completely impractical."
David Bloom, currency strategist at HSBC, says that eventually the renminbi and the euro could challenge the dollar’s status, but it will be a long process.
In particular, he says, the Chinese authorities will have to open up their capital markets for the renminbi to become a reserve currency.
"There is no doubt the dominance of the dollar is fading in absolute terms," he says. "But it will take time."
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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property
Company Press Release, October 27, 2010
VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:
-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.
-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.
-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.
Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.
"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."
For the company's full press release, please visit:
http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
