In an earlier post, we had discussed Rip Van Winkle trades wherein you put on a trade and forget about it for the next 20 years.
While stocks,realty etc may be some of the investment classes for such trades, even currencies can be a fertile area for Rip Van Winkle trades.
Take for instance, the historical data of USD and the Pakistani Rupee (PKR) for the last twenty years
One would have made 4x just holding onto this trade .Considering the huge leverage one could employ in the forex markets, the returns could have been much much higher
Does this trade still hold?Considering the country’s dire economic straits, radicalization of its people,the immense incompetence of its political leadership the imminent withdrawal of US from Afghanistan and drying up of western aid, it is fairly clear that the Pakistani Rupee will head lower with time.
So the right thing to do is to sell PKR and buy USD and keep rolling the positions for the next twenty years.