Currency Analysts Expect Dollar To Strengthen

For those worried about the U.S. Dollar, it may bring you comfort that currency analysts are expecting it to actually do well over the next few years (or it may make you even more scared). Below we highlight the consensus estimates for various currencies from their current levels through 2011.

As shown, the Euro is expected to decline steadily versus the U.S. Dollar to a level of 1.25 by 2011. The only currencies expected to gain versus the $ from now to 2011 are the Russian Ruble, Indian Rupee and Japanese Yen.

If you think the $ is hitting a bottom, equities that derive most of their revenues domestically should start to do better. If not, stick with names that bring in plenty of international revenues. As the Bespoke International Revenues Index shows, stocks with a global presence have outperformed in recent years.

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Comments

[Kelleev:]

When you give information based on "Experts," to be credible, you have to cite who the "Experts" are.

2007 Sep 20 04:09 PM

[BillCust:]

Yeah, otherwise u may have caught a few lies and rumor with bogus chart that I posted last night around the message boards, bud.

2007 Sep 20 04:48 PM

[Robert West...:]

There is certainly no consensus on this - from today's Financial Times which highlights the dollar's dependency on Russia, Saudi, Iran, Qatar etc continuing to price their oil & gas exports in dollars :

The Short View: Falling dollar
By John Authers, Investment Editor



As of midday on Thursday in New York, one US dollar would only buy you 99.99 Canadian cents. It is more than 30 years since the Canadian and US dollars were last at parity.

But it is only a symptom of the fall-out from this week’s sharp Federal Reserve rate cut to 4.75 per cent. That sparked some life into the money and credit markets, as can be seen in the return of high-yield bond issuance and sharp falls in US interbank lending rates.

A further sharp contraction in the commercial paper that US companies issued this week combines with stubbornly high interbank lending rates in Europe to suggest that the squeeze is not over. But it looks likely the rate cut will succeed in its aim of getting the world financial system through its short-term crisis.

The dollar’s travails illustrate the possible long-term consequences. An unexpected rate cut weakens a currency – it lowers interest rate differentials, making dollar assets less attractive for foreigners, and it increases risks of inflation.

But the dollar is caught up in deeper dynamics. The news that pushed it lower on Thursday came from Saudi Arabia, where the central bank, which has pegged its currency to the dollar, decided not to follow the Fed by cutting by 50 basis points. That prompted speculation that the Saudis no longer want to peg to a currency in freefall.

Further, a long-term link between the dollar and the oil price has broken down. A high oil price used to mean a strong dollar as oil exporters put their money in dollars. But now we have record crude prices and the weakest dollar in decades.

ABN Amro shows that oil exporters’ imports from the US are falling, as is the share of their reserves in dollar- denominated assets. Rising oil prices give petrodollars ever more weight. The measures taken to get through the money market squeeze may hasten their move away from the dollar.

2007 Sep 21 01:03 AM

[Sr. Pessimist:]

I don't disagree with the long-term forecasts. Bush really did something nasty to the economy for all the rich friends that put him in office. Plus, the economy got a good view of who does what regardless of money.

2007 Sep 21 01:21 PM

[flyoverman:]

Why bash Bush? The economy has been very good under Bush, and in contrast to Clinton, he actually did something to help the create the environment through his tax incentives. Did we forget how the economy was dropping even before Clinton left office, then with 9-11? It took some good leadership to help or at least allow our economy to rebound. Why remark about rich friends. I believe it was tough laws passed and signed by Bush that put away the folks at Enron, MCI, etc. Those clean-ups were part of Bush's actions, but the faults were created on the previous watch.

2007 Sep 21 07:57 PM

[Living Off ...:]

who are these experts and whats their track record?

I believe the ruppee will see 36 before dec 08 and the AUD will hit 90
by then too.

2007 Sep 24 05:59 PM

[GreenAB:]

so if all the "experts" are bullish, i consider them holding long positions in the dollar.

so where are the future buyers?

as for currencies the consensus is mostly wrong.
when the euro hit 1.36 vs. the dollar two years most economists wer pretty bullish for the euro expecting it to fly to 1.40.
but the opposite happened.

2007 Sep 26 01:33 PM

[phdinsuntan...:]

these "traders" dont know what they are talking about, as long as the petro dollars be flowing to the european safe heaven from the middle east and russia and not to the US, any bet on this theory is lost money, just a matter of confidence...

2007 Sep 27 08:14 AM