Harvard’s Ferguson Says Long Dollar on Shale Gas Revolution

Harvard University professor Niall Ferguson, author of “The Ascent of Money,” said he expects the dollar to rally after shale gas discoveries in North America.

“I am long U.S. dollar, which is somewhat a contrarian position,” he said today in Abu Dhabi. “The benefits of the shale gas type oil revolution are still being underestimated by most observers and I think there’s a lot more upside to come in the United States than most people anticipate.”

The U.S. is poised to become a net exporter of liquefied petroleum gases for the first year ever as shale-based energy production jumps, prompting new orders for specialized ships to haul propane and butane. The boom in natural gas and oil production helped the U.S. meet 84 percent of its energy needs in the first 10 months of last year, on pace to be the highest annual level since 1991, EIA data show.

“If you think about what the shale gas type oil story means for the current account it has to be positive,” Ferguson said later in an interview. “It has to be reducing it, so that’s another dollar positive force,” he said.

The last time the U.S. reported a surplus in the current account, which is the broadest measure of trade, was in the first two quarters of 1991. That was a period when the Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, rose 16 percent.

The Dollar Index rose 0.2 percent to 81.743 at 2:56 p.m. London time after rising to 81.948 on Feb. 26, the highest since Aug. 22. It will be little changed at 81.80 by year-end, according to the median of 12 analyst estimates compiled by Bloomberg.

The correlation between the dollar and crude oil will increase over the next two years as U.S. energy production grows, according to UBS AG, which means the greenback would track movements in oil prices more closely.

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