Most-Accurate Forecasters Say Dollar Beats QE3
The world’s most-accurate foreign- exchange strategists say the dollar will strengthen even as the Federal Reserve debases it, unlike the previous two rounds of economic stimulus, when cash injections weakened the currency.
Fed Chairman Ben S. Bernanke’s $40 billion-a-month of bond purchases will leave a stronger currency in 2013, say nine of the 10 forecasters with the lowest margins of error in the six quarters ended Sept. 28 as measured by Bloomberg. Wells Fargo & Co. and Westpac Banking Corp., which tied for most-accurate, expect little damage from efforts to stimulate the economy and the so-called fiscal cliff of spending cuts and tax increases scheduled for next year.
While the Dollar Index, which measures the currency against those of six major trading partners, fell 4.6 percent and 3.9 percent in the first two rounds of Fed stimulus that added $2.3 trillion to the banking system, this time will be different, forecasters say. Investors will demand the world’s reserve currency as U.S. growth outpaces its developed counterparts.
“If the U.S. economy keeps outperforming, then it shouldn’t cause the U.S. dollar much damage,” given that most of its trading partners are growing slowly or contracting, said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. Monetary easing is only “a short-term negative for the U.S. dollar.”