Like goods and services, currencies respond to the forces of supply and demand, which in turn are the result of several factors. Among them: trade, interest rates and GDP growth. Which currencies should form part of your portfolio over the next 10 years?

(Sept 25): The US Federal Reserve announced on Sept 20 that it would start reducing the size of its US$4.5 trillion ($6.1 trillion) balance sheet next month. It also stuck with its forecast to raise the federal funds rate again this year, citing healthy growth. The recent hurricanes are “unlikely to materially alter the course of the national economy over the medium term”, it said in a statement.

Following the announcement, Bloomberg’s US dollar index gained 0.5%. And a few market watchers are now betting on a reversal of the slide in the US dollar this year. In spite of steady economic growth and improving employment data, the market has been sceptical that the Fed would raise interest rates, given that inflation has remained below its 2% target.

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