Tags: dollar | bullish | rates | Fed

WSJ: Dollar May Be Poised for Long Bullish Run

Tuesday, 02 Jul 2013 10:26 AM

By Dan Weil

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The dollar has risen solidly over the past five months, and many experts believe the party is only getting started.

"Increasingly, investors and analysts say the dollar's performance during the second quarter could mark the dawn of a multi-year era of dominance unseen since the 1990s," according to The Wall Street Journal.

The Dollar Index, which measures the greenback against six other major currencies, has gained 4.8 percent since Feb. 1.

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In recent weeks, the dollar has benefited from Federal Reserve Chairman Ben Bernanke's comments that the Fed may soon begin tapering its quantitative easing.

The comments have driven interest rates higher, and rising rates help the dollar by making it more attractive to global investors seeking high yields.

"Whether the Fed decides to start scaling back on its bond buying at its September meeting or later in the year, it is still poised to start reversing its unorthodox monetary policy earlier than other central banks, which is firmly supportive of the dollar," Win Thin, a currency strategist at Brown Brothers Harriman, told Reuters.

And while the U.S. economy isn't setting the world on fire, it looks quite strong as compared with Europe and Japan. The struggles of emerging markets in recent weeks also have driven investors to the greenback.

"We've been in a dollar bear market for the last 10 years," Jens Nordvig, a managing director at Nomura, told The Journal. "This shift is a very big deal, with profound implications for everything."

"The recovery is still uneven," James Kwok of Amundi, which manages $911 billion of funds, told The Journal. "But the U.S. still has much more economic upside than anywhere else in the world."

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