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Dollar Weakens, but Some Investors are Betting on a Comeback |
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The dollar is hovering near record lows, as investors are concerned about drops in the prices of durable goods made in the US. Analysts are worried about stagflation. Many eyes are watching Bernanke. British economic growth is slowing as well.
The silver lining, Reuters says, is that investors are betting on the dollar to rise this year against foreign currencies.
One view, expounded by Investec Asset Management, has it that no matter how the U.S. and global economies proceed, the dollar does well.
Under scenario one, the U.S. has a mild recession but recovers quickly with the help of lower interest rates from the U.S. Federal Reserve. Once the Fed stops cutting, investors buy the dollar because rates and the economy will be heading up.
The second scenario is that the U.S. economy suffers a heavy downturn and drags the global economy with it. This would prompt U.S. investors to bring their money home and global investors to seek safety, both of which would boost the dollar.
“For the second part of the year we expect it to be win-win for the dollar,” said Thanos Papasavvas, Investec AM’s head of currency management, adding that he expects the dollar to remain weaken before then.
But is what’s good for the dollar good for the country? Or is it just that certain parasitic elements will benefit no matter what? Paging all economists…
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