David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, points out that there is one policy tool that is practically unchanged since two years ago … the U.S. dollar:
It is the only policy tool that has not budged one iota since the crisis erupted two years ago. But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, it would make perfect sense for a country that always operates in its best interest - even if it may not be in everyone’s best interest - to sanction a U.S. dollar devaluation as a means to stimulate the domestic economy.
It follows that Rosenberg is of the opinion the greenback has significant downside potential. He therefore suggests that investors should start thinking about protecting their portfolios against a declining dollar by taking positions in commodities, gold, the Canadian dollar, resource stocks and U.S. sectors that have high foreign exposure (materials, industrials, staples, health care).