U.S. Dollar Expected to Stand Tall Once Again

After 20 months of downturn, things are starting to look up for the U.S. economy, and this could bode well for the greenback.

With the end of the financial crisis nearing, markets will soon stop trading the U.S. dollar as a function of risk aversion and get back to the basics of focusing on the cyclical backdrop to the U.S. economy, according to Yanick Desnoyers, assistant chief ecnomist at National Bank Financial.

The key to this currency outlook is an imminent return to job creation in the United States, which will force financial markets to price in interest rate hikes by the Federal Reserve.

“Despite the colossal budget deficit, these cyclical forces should be enough to give the USD a second breath, at least over the short term,” Mr. Desnoyers wrote in a report.

As for the Canadian dollar, he said its recent appreciation looks slightly exaggerated as it is out of line with some key commodities Canada exports. This excess is attributable to capital inflows from abroad driven by the loonie’s popularity at the international level, he added.

The anticipated upward movement in the USD is expected to drive the Canadian dollar down slightly as the 2-year yield spread between Canada and the United States reverses for the first time since 2007. National Bank expects the loonie to dip back just below the US90¢ market over the next two quarters.

Comments

[sickofthehype:]

Ok, good luck betting on it. Devaluation coming soon..

Sep 02 01:05 AM

[Dave Wrixon:]

Judging by this thread the Columbian Peso is the one to watch!

Sep 02 02:52 AM

[Michael Clark:]

It all depends on the Fed, doesn't it? If the Fed is long oil, then it will keep buy TBonds no one else wants, and keep interest rates low. And keep devaluing the dollar.

Would you rather have $1 in your pocket that was worth $1, or $100,000 in your pocket that was worth 35¢? Another example of 'what looks good isn't always good'. Ben, your dad, Alan Greenspan ruined the American economy by doing what you are doing -- why are you so intent on making it even worse?

Sep 02 03:36 AM

[Tony Daltorio:]

Things are starting to look up for the US economy and the US Dollar?

The end of the financial crisis nearing?

And to back up these claims, there is a quote from a bank economist?

I gotta admit - this is one of the best pieces of comedy writing I've seen in a long time. I couldn't stop laughing!

Sep 02 01:52 PM

[morssglobal...:]

for more on the dollar, see www.morssglobalfinance.../

Sep 02 02:46 PM

[adan:]

what's kinda interesting is, right now, it seems the dollar's in a sort of limbo -

yet, if we have a strong recovery, or, strong correction, we'll probably get a stronger dollar...

weird....

Sep 04 11:27 PM