Federal Reserve Chairman Ben Bernanke is at it again. In his Semiannual Monetary Policy Report to Congress, Bernanke told members of the House Financial Services Committee, “Even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further.” That got Wall Street’s ears perked up, and when the head of the central bank suggested the strategy to do so would be via “additional stimulus,” stocks and gold prices surged — and the value of the U.S. dollar got slammed.
The possibility of a third round of quantitative easing, or QE3, could take a lot of different forms, but the details here aren’t what are most important. What matters most is even the willingness to essentially print more money is going to cause the greenback further woes. If we do see some form of QE3, we are likely to see other global currencies rise relative to the U.S. dollar. When this happens, the value of the Nuveen Multi-Currency Short-Term Government Income Fund (NYSE: JGT) goes up.
The investment objective of JGT is to provide an attractive level of current income and total return. As such, the Nuveen Multi-Currency Fund invests directly in short-term international, non-U.S. government securities. The strategy is to invest indirectly in international securities through the purchase of forward currency contracts and other derivative instruments relating to such short-term securities.
The investments of the fund are denominated by (and otherwise provide exposure to) multiple international non-U.S. currencies. That strategy now is generating an attractive 9.06% dividend yield, making this closed-end fund a winner for income-oriented investors.
As long as the Fed keeps interest rates ridiculously low while also threatening to pump freshly minted dollars into the money supply via some sort of QE3 chicanery, the greenback will come under pressure. A further decline in the U.S. dollar during a lower interest rate environment should provide the catalyst for JGT’s shares to trade at a premium to its net asset value in the months ahead. So, if you’re an income investor, check out this dollar-sensitive fund.
Disclosure: Bryan Perry recommends JGT in his Cash Machine advisory service.
