First published: Financial Times, 18/03/2013
Investors have come to regard a weak US dollar as an essential part of the low real rate, high capital flow backdrop for about a decade, but things are starting to change.
The US dollar has had a spring in its step this year, with the dollar index, a weighted composite of the dollar’s strength versus its trading partners, rising almost 4 per cent. This is likely to be the “amuse-bouche” of a more substantial meal of appreciation that could go on until 2015, marking a big shift in the investment environment.
A change in US dollar direction would be important partly because it has form. Since the collapse in 1971 of the Bretton Woods Agreement, a system of fixed exchange rates, the US dollar has been through three downwaves……more