The basics of investment point to the US dollar exchange rate as a powerful predictor for the overall global economic performance. Therefore much of the corporate and independent analytical effort is directed towards forecasting and even modeling the dynamics of the ‘greenback’. The dominant sentiment is pessimistic, with many investors expecting a weaker dollar in 2014. The Voice of Russia talked with Economist and writer Jerry Robinson, and Maria Tsiguleva, head of customer relations at Alfa Trading looks at the possible movements of the exchange rate curve for the USD this year.
Jerry Robinson believes:
The dollar has been very difficult to forecast even for the most expert forecasters, because for a long time it’s been in a downward trend overall. If you take a look at the chart for the US dollar it’s been going down. But it has this amazing resilience at its current level, it seems to be attempting to bounce back. The euro has been providing quite a bit of an interesting challenge to the dollar, but also helping the dollar. By trying to forecast the dollar we have to we have to look at other areas, other regions, and other currencies that might cause the dollar to either go up or go down. I expect overall for the dollar in 2014 to continue its downward qualm.
Although the US and Europe remain the economic engines for the advanced democracies, there are other factors molding the shape of the exchange rate curve. China’s intentions to continue selling America’s sovereign debt both define investor sentiment and actually lead to a lower currency value. This goes in contrast with Japan’s attempt to generate inflation and lean towards a cheaper yen. Maria Tsiguleva breaks down the downward forecast into specific reasons:
We think that the USD depreciation could become a reality in the year 2014 on the back of the improvement of the European economy. Moreover, the regulator is keen to reduce the volume of its bond-buying program during its mid-March meeting from $85 billion to $70 billion. It could lead to the rise in the stock markets and also to the flight from the safe dollar-denominated assets. So, in the first quarter of the next year the EUR/USD could rise to 1.41 afterwards it could fall to 1.365.
The sheer volume of variable factors comprising the forecast models for the US dollar makes it an ungrateful task. The risk-averse market players may choose to hedge by betting on many currencies including crypto currencies – the latest addition to the investor basket. It is, however, clear that the backdrop against which the US dollar is set to fluctuate this year will be pushing the ‘greenback’ down, and the resilience of the underlying economy is the decisive factor in overcoming this pressure.
Fuente: Voice Of Russia