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英文财经 |
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King Dollar Rallies |
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星期三, 八月 20, 2008 08:51:22 |
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by
Nicholas A.Vardy |
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The biggest economic story of the last week has been the continuing rally in the U.S. dollar. After flirting with record lows against the euro as recently as July 15, the dollar hit a six-month high against the euro and a two-year peak against the U.K. pound sterling as growth in the world's developed economies girded to a halt. Even long-time bears such as George Soros and Jim Rogers admitted that they had covered their short positions in the greenback.
After spending the last half decade in the doghouse of currency traders, the dollar is emerging as the world's favorite currency. Why the sudden change? It turns out that the popular "decoupling theory" -- the belief that the rest of the world's economies can continue to thrive while the U.S. economy slows -- is bunk. Much to the chagrin of market Cassandras, it is other developed economies, and not the United States, that are flirting with recession.
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King Dollar Rallies: The Developed Economies Stumble...
Data released last week shows that the 13-nation eurozone economy contracted 0.2% in the second quarter. That's the first decline since before the euro's introduction in 1999, with the economies of Germany, France, and Italy all contracting. And because inflation in the eurozone is running at almost double the European Central Bank's (ECB) target rate, it's unlikely that the ECB will cut interest rates before 2009. As a result, both European economies and the euro are likely to stagnate during the foreseeable future.
And global economic weakness extends far beyond the eurozone. This past week, the Bank of England's governor, Mervyn King, (the United Kingdom's equivalent to Ben Bernanke) acknowledged that Britain's economy may enter a recession during the next 12 months. With a bigger housing bubble and even greater consumer credit problem than the United States, the United Kingdom, and its pound sterling currency, has every reason to continue its status as the currency markets' newfound whipping boy.
Finally, until last week, Japan had been seen as relatively immune to the ravages of the global credit crunch. That's no longer the case. Japan's economy contracted by 0.6% in Q2 -- the sharpest drop in seven years -- belying the hope that the world's second-largest economy could continue to expand in blissful isolation.
King Dollar Rallies: ...As the U.S. Economy Rallies
Relentless negative headlines notwithstanding, compared with other developed economies, the United States doesn't seem to be in such bad shape after all. While the world's largest economies contracted in Q2, the U.S. economy grew at 1.9% -- a rate Europe would consider strong in the best of times. And a surge in export sales in June probably means that this number will be revised upward.
The U.S. economy also has the most to gain from the recent fall in the price of oil and is therefore likely to recover more quickly than its counterparts in Europe and Asia. That also means that U.S. interest rates will head higher, sooner, providing a further boost for the dollar. Finally, the dollar's revival is likely to put to rest talk of global central banks and other large holders of reserve assets diversifying out of the U.S. dollar.
King Dollar Rallies: Good News, Bad News
The good news about the rallying dollar is that Americans will find it (relatively) cheaper to travel abroad. A stronger dollar also will help quash domestic inflation by making imports and dollar-denominated commodities cheaper. A stronger greenback also should boost the U.S. stock market -- already the top performing developed market in the world this year, if only because it has fallen less than its rivals. As the dollar strengthens, U.S. stocks will become more attractive to foreign investors, whose dollar-denominated assets suddenly become more valuable when converted back to their local currencies.
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But a rallying dollar is bad news for booming U.S. exports. Fueled by a weak dollar, American exports have single-handedly rescued the U.S. economy from slipping into a recession. As the Economist magazine reported this week, in the last 12 months, U.S. exports now are actually growing faster than Chinese exports in dollar terms. And excluding oil, the U.S. trade deficit has fallen by almost one-quarter since 2006. These gains may begin to evaporate as a stronger dollar will make it more expensive to buy U.S. goods, even as developed economies slip into a recession. A stronger dollar also will hurt U.S.-based multinational companies such as GE and Coca-Cola Co., whose overseas profits will be worth less in dollars.
Its recent rally notwithstanding, the greenback remains relatively cheap. So, it's unlikely U.S. exports will drop off of a cliff. Furthermore, the shrinking economies of Japan and Europe account for only about 20% of America's exports. Emerging economies now buy more than half of U.S. exports, and domestic demand in the four BRIC countries -- Brazil, Russia, India and China -- remains robust and is expected to grow by more than 9% in 2009.
King Dollar Rallies: Head Fake or Genuine Recovery?
The weak dollar long has been a metaphor for the United States' decline. To suggest that the dollar rally may be sustainable, and that the U.S. economy may be in the best economic shape among the developed economies, is to invite ridicule from everyone, including grumpy foreign commentators, left-leaning academics and libertarian market Cassandras. But recall that this is the same group that predicted that the Chinese stock market would go up forever -- and that Beijing wouldn't let the market crash before the Olympics. Not that positive U.S. economic news or a sustained dollar rally would dissuade any of Wall Street's Cassandras from continuing to call the current market turmoil the "worst crisis since the Great Depression." Like Merrill Lynch's David Rosenberg, they'll move the goal posts of what actually constitutes a "recession." Or even less compellingly, they'll claim the government statistics are made up. Now, neither randomly changing definitions nor "begging the question" are modes of argument that would get the Cassandras a passing grade in an introductory law school class. But it is enough to generate apocalyptic headlines and Jonathan Edwards' "Sinners in the Hands of an Angry God" style harangues.
The market psychology behind the weak dollar is the same as any financial mania -- Japan, biotech, China -- except in reverse. There are no guarantees, but here's the most likely scenario. T he U.S. dollar tends to move in six- to seven-year cycles, shifting between periods of extreme undervaluation to overvaluation against foreign currencies based on purchasing power parity. So after six years of relentless decline, the dollar's fortunes are finally shifting -- and it's the overvalued European currencies in particular that are set to tumble.
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文章来源：MoneyShowAsia |
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