10 Oct 2013
USD weakness to extend short term - Fidelity
FXstreet.com (Barcelona) - After the official announcement of Fed's Vice-Chair Janet Yellen to be the next head of the US central bank, Trevor Greetham, Head of Asset Allocation at Fidelity Worldwide Investment, expects further USD weakness short term.
Key Quotes
“The Fed’s decision to delay a reduction in the pace of quantitative easing coupled with the much anticipated nomination of Janet Yellen as Fed chair could mean the recent phase of dollar weakness continues in the short run.
“However, we believe a multi year bull market for the dollar began in 2011 and it will resume before long. With home prices rising and the economy shrugging off spending cuts, the US economy is escaping from the debt trap. Interest rates are likely to rise in America before they do in the other major economies where growth is weaker.
“A period of dollar weakness should create an opportunity to buy US equities. It should also allow investors to increase exposure to Japan at the expense of Emerging Market equities. Emerging markets tend to underperform when the dollar is strong as portfolio capital returns to America and commodity prices fall. Japan on the other hand benefits directly both from the impact of yen weakness on the export sector and from a lower price of commodity imports.”
Key Quotes
“The Fed’s decision to delay a reduction in the pace of quantitative easing coupled with the much anticipated nomination of Janet Yellen as Fed chair could mean the recent phase of dollar weakness continues in the short run.
“However, we believe a multi year bull market for the dollar began in 2011 and it will resume before long. With home prices rising and the economy shrugging off spending cuts, the US economy is escaping from the debt trap. Interest rates are likely to rise in America before they do in the other major economies where growth is weaker.
“A period of dollar weakness should create an opportunity to buy US equities. It should also allow investors to increase exposure to Japan at the expense of Emerging Market equities. Emerging markets tend to underperform when the dollar is strong as portfolio capital returns to America and commodity prices fall. Japan on the other hand benefits directly both from the impact of yen weakness on the export sector and from a lower price of commodity imports.”