The chief investment officer of currency manager AG Bisset believes the US currency will plunge 36 per cent against the euro over the next year or so, taking it to levels it has not seen in more than a decade.The greenback's recent weakness"is the beginning of a very large move" that could hurt the droves of investors exposed to it through their holdings in US stocks and bonds, Lindahl said.
Getting the dollar right is key for investors, as its trajectory sways everything from corporate earnings to the prices of raw materials such as oil and gold.Lindahl's research breaks down the dollar's fluctuations over the decades into 15-year cycles that show the greenback weakening sharply against the euro before recovering most of the losses.
Goldman Sachs, for instance, believes a steadily improving global economy and negative real rates in the United States are a"sustained recipe for dollar weakness," and forecasts the euro to trade at US$1.30 by 2023, from the current US$1.196. A declining dollar can have a benign impact on markets, as it loosens financial conditions, boosts profits for US exporters and makes it easier for countries to service dollar-denominated debt.
At the same time, a prolonged dollar decline could send a more ominous signal, reflecting doubts about US finances and economic growth, as well as a potential weakening of the dollar’s position as the world’s dominant currency.
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