Prosperity Concierge believes that investors should be heavily invested in emerging markets and commodity currencies.
Nouriel Roubini, the New York University professor who predicted the credit crisis, expects the dollar to weaken against Asian and “commodity” currencies such as the Brazilian real over the next two or three years.
“I see anemic recovery of economic growth in the U.S.,” and “the U.S. current account is still very large,” Roubini, a founder of Roubini Global Economics, said at a conference in Moscow today. “In the next two or three years, the dollar has to weaken further on a trade-weighted basis.”
International Monetary Fund Managing Director Dominique Strauss-Kahn and World Bank President Robert Zoellick said this week the recovery is “fragile.” While the bank and the IMF last month raised their forecasts for global expansion, the rebound is uneven, with emerging economies such as China and India helping pull the world out of the worst recession in six decades.
Roubini expects the dollar to weaken 15 percent to 20 percent “over the medium term” against the Chinese yuan, a basket of Asian currencies and “some” of the commodity currencies “as long commodity prices remain high,” he said, adding that these are overvalued.
The dollar today rose to the strongest level since June versus the euro on concern some nations using the single currency will struggle to reduce their budget deficits.
The dollar appreciated 0.4 percent to $1.3840 per euro as of 11:53 a.m. in London and traded earlier at $1.3827, the strongest since June 15. The dollar is gaining because concern that Greece may struggle to repay its debt is weighing on the euro, Roubini said.
‘Has to Weaken’
The Dollar Index, which tracks the U.S. currency against those of six major trading partners, has declined 7 percent in the past year.
The U.S. economy, the world’s largest, grew at a 5.7 percent annual pace in the fourth quarter, a government report showed last week. It was the second quarter of growth following a year-long contraction that marked the deepest recession since the 1930s.
“There’s going to be for a couple of quarters better economic news out of the U.S.,” due to “temporary factors, such as restocking, fiscal stimulus, and base effects,” said Roubini. “In the second half, economic weakness is going to reappear again. On a trend basis, the dollar has to weaken.”
Related Information in Prosperity View
- Debt a Threat to Global Economy – Roubini
- Cost of Debt: Interest Rates to Remain Low
- Spending and Investments Decline, Chance of Recession Rises
- Emerging Markets Still a Compelling Investment
- Our Economy: No-Growth and Immune to Stimulus
- Debt in Emerging and Developed Economies: A Reversal That Will Affect How We Invest
- Dollar will Drop so Don’t Invest in Dollar Assets – Marc Faber
- High Unemployment Expected To Keep Interest Rates Low
