When permitted to function, free markets are the ultimate real-time indicator.

So even if you knew nothing about deficit-driven problems in Portugal, Spain and Greece, even a cursory glance at the charts of a few major world currencies would illustrate what is just now hitting the headlines: Europe, shackled by the entitlement-rich PIIGS (the aforementioned nations, plus Ireland and Italy), is in a world of hurt.

Over the past six months, the euro, as tracked by the popular CurrencyShares Euro Trust, has dropped more than 10%. CurrencyShares Swiss Franc Trust, the supposed safe haven asset designed to track the Swiss Franc, has fallen nearly 7%. You ll note the markets began breaking down well before credit downgrades and contagion made the front page.

Old Europe and the New World

CurrencyShares Euro Trust (FXE) and CurrencyShares Swiss Franc Trust (FXF) vs. CurrencyShares Canadian Dollar Trust (FXC) and CurrencyShares Mexican Peso Trust (NYSE) 6 months
Source: BigCharts.com

But as European currencies have sunk, North American currencies have soared. Mexico and Canada expect budget deficits near 2.6% and 2.8% of their GDP, half that of the euro zone. That comparative stability, along with higher commodity prices, is reflected in their appreciating currencies.

The Canadian dollar, easily accessible to domestic investors via shares of CurrencyShares Canadian Dollar Trust, sits at a 23-month high against the dollar and not far off from its 2007 all-time high. The Mexican peso, which we profiled in December, and is tradable in any stock account with CurrencyShares Mexican Peso Trust is now at an 18-month-high and has risen 7.7% year to date, the best-performing of the 16 major currencies tracked by Bloomberg. For the first time in 12 years, the Mexican peso and Canadian dollar are the strongest major currencies in the world.

Notably, their strength has also been accompanied by a rally in the dollar, tracked by funds like PowerShares DB US Dollar Index Bullish, which has risen by nearly 4%. This NAFTA Trade , first discussed last year, gained 4.5% in the first quarter, according to Bloomberg data, the best return since 1977. For new currency risk exposure, the Mexican peso remains my top choice.

At the Close

The rogue trader that almost blew up MF Global in 2008 provides a telling illustration of how emotional investing can quickly wreck your bottom line.

Mr. Dooley's unauthorized trades caught up with him Feb. 26, 2008, when he allegedly bought and sold about 31,964 wheat contracts. He began the overnight trading session with a negative balance of about $3,000 in his account and, by the next morning, held a short position valued at $872 million.

-- Ex-Traded Indicted for Wheat Bets (WSJ)

At the time of writing, Hoenig s fund held positions in many of the securities mentioned.