If I take the view that the US$ will continue to decline (and the HK$ will remain pegged to the US$ at its current level), it would make sense to invest in assets which are not denominated in US$. Here are the options under consideration:
1. South East Asian currencies such as INR, MYR, THB, PHP and SGD. All of these currencies have appreciated significantly against the US$. All have GDP growth rates higher than the US or the Euro zone and are characterised by rates of inflation which are rising to levels of concern. Allowing their currencies to appreciate further would help manage inflation but, possibly, at the price of making exports less competitive.
2. RMB. China has been under pressure to allow its currency to appreciate at a more rapid rate. There is no shortage of forecasts that the RMB will appreciate by 8-10% in 2008. FX controls limit me to RMB 20,000 per day in conversions. I already have a token investment in RMB. Interest rates for RMB deposits are very low, meaning I would be relying on meaningful currency appreciation to make a profit.
3. AUD/NZD. These currencies are appreciating and have recently reached their highest levels against the US$ for many years (but not all time highs). They also offer attractive interest rates. The central banks in both countries have been consistent in giving priority to combating inflation which requires a high interest rate policy. The AUD/NZD have been perennial favourites of carry trade investors.
4. CAD/RUB. These are less familiar to me, but with economic growth being fueled by the on-going resources boom, these have to be of interest. One option for me here in HK is the Lyxor Russia ETF which gives me an investment in RUB combined with exposure to what is probably the most resource rich country in the world. That said, I need to learn more about the Russian market before doing this.
Longer term (and this would require very different economic conditions than at present), buying a property in Australia or New Zealand financed in a low interest rate and weak currency such as Yen would be attractive. With both the property markets and the currencies at historically high levels I am not comfortable doing this now.