Buying U.S. equities is a better way than currencies to invest on positive economic growth, according to Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York.
Major currencies, such as the Canadian dollar, that historically benefit from stronger U.S. growth seem to be at “full value” and may struggle to gain further, Ruskin said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. Deutsche Bank expects the U.S. economy to expand 2.7 percent this year compared with a median estimate of 2.2 percent from 79 economists in a Bloomberg News survey.
“If you think that the U.S. is in the lead in terms of the risk-positive story, then I think it’s U.S. equities that are going to lead the show,” Ruskin said. “Currencies like the Aussie, Canada and the New Zealand dollar don’t seem to be able to get the usual traction that you associate with the S&P going up. So that tells me you want to play that much more directly through the S&P. EM currencies will also respond as well.”
The Standard & Poor’s 500 Index has rallied 8.9 percent this year. The Australian dollar has risen 1.5 percent versus nine developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Canada’s dollar added 0.3 percent and New Zealand’s dollar has gained 3.7 percent.
The euro will survive as the region’s shared currency in 2012 “quite easily” because risks in peripheral nations aren’t systemic, Ruskin said.
The euro rose 0.9 percent to $1.3266 and advanced 1.4 percent to 108.13 versus the yen at 12:44 p.m. in New York.
The 17-nation currency will trade at $1.25 by mid-year as events including Italian labor reform and Greek elections add to optimism, according to Ruskin. The euro will peak between $1.35 and $1.40 in 2012, he said.
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