Hey Dollar Bulls! It's Your Time

Dollar bulls: This is your moment.

Citigroup Inc.'s currency guru Stephen Englander believes a series of "known unknowns" will push the dollar higher in the near-term. This morning he writes: "Looking ahead over the next couple of weeks we see multiple sources of risk which we do not think are fully priced in. Most of these risks appear to be asset market negative, involving higher U.S. rates, more geopolitical disruption and downside economic shocks. The general theme is USD [U.S. dollar] strength."

Let's start with something we can all agree on... the weather.

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Englander joins Bloomberg's Economics Editor Mike McKee in arguing that weather-related economic weakness is largely behind us, paving the way for housing and retail to rebound next quarter. As data improves, they expect a louder drum beat from Federal Reserve governors regarding interest rate normalization. Higher rates should prove dollar bullish.

By contrast, Asian economies are struggling. China's central planners announce a slowing of the urbanization essential to its path towards a more consumer-driven economy. In addition, Japan faces a new sales tax in April meant to reduce a perpetual government debt (now 226 percent of gross domestic product versus 72 percent in the U.S.). Weakness abroad argues for holding dollars.

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Third point: Socchi is so last month. G-7 leaders have said they will boycott the planned G-8 meeting in Socchi. Instead they'll meet on their own in Brussels during June. That's right, Russia cannot attend.

This is major. Europe gets a third of its energy from Russia, and Russia gets 75 percent of its foreign domestic investment (FDI) from Europe. While India and China may step in to make up the difference in FDI, as Eurasia Group founder Ian Bremmer told us this morning on Surveillance, cracks in pan-European unity highlight the dollar's relative safety. Again, this is dollar bullish.

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Add it all up, and Englander argues for buying the dollar. He has plenty of company. The 23 currency strategists tracked by Bloomberg forecast an average gain of 4.7 percent by September... even the two bears see only a 0.2 percent downside.

Dollar bulls: This is your moment.

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