You have heard of the term "Carry Trade", more specifically "Yen carry trade", well apply it to US$.
An investor in say US holds US$, but wants to buy Australian gold stocks with an Australian broker, he/she will borrow A$, buy the stock. Now as US$ weakens, A$ rises the investor actually is making money on the Foreign Exchange side of the transaction. Now the risk of this is that the currencies may go against the investor.
How lets assume borrows at A$ 0.88, and when the investor sell the Aussie gold stock the A$ is 0.90, the investor when it is convert back into USD makes a return.
Now add that currency return to the return on the Gold share and it looks a nice little earner.
Now this type of transaction is not for the faint hearted...but if had someone had taken the chance at on the A$ at 0.80 a just over 8 weeks ago, right now the investment has already returned 12.5% on the currency alone.
The downside as we look, is that the producers get their sales dollars in USD and have to convert into A$, and thus their sales are lowered, however the big players need USD anyway, so really this might not a big concern as we think...
