Don’t Bet on a Stronger Dollar

Economic pundits, almost without exception, are predicting a stronger dollar in 2015 – an expectation that is leading investors to place some very large bets. But that market strategy could turn out to be a very large mistake.

NEW YORK – Economic pundits, almost without exception, are predicting a stronger dollar in 2015 – an expectation that is leading investors to place some very large bets. But that market strategy could turn out to be a very large mistake.

The consensus reflects the fact that the United States is currently the only major economy where growth prospects are improving. Most recently, the US Commerce Department revised upward its estimate of GDP growth for the third quarter of last year, to 5% – the highest rate in 11 years.

Moreover, the revision was based mainly on personal consumption and business investment – the most stable and persistent components of GDP. Consumer sentiment is at its highest level since 2007. Low oil prices, which reduce the cost of gas at the pump, provide an additional boost by giving US households more cash to spend at the mall. The unemployment rate is 5.6% and falling.

To continue reading, please log in or enter your email address.

To read this article from our archive, please log in or register now. After entering your email, you'll have access to two free articles every month. For unlimited access to Project Syndicate, subscribe now.

required

By proceeding, you are agreeing to our Terms and Conditions.

Log in

http://prosyn.org/MMMxItU;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.