Michael Woolfolk, senior currency strategist at Bank of New York Mellon, says the dollar’s recent rebound will peter out early this year.
The greenback dropped to a 14-month low in November, but has since bounced back amid signs of economic recovery in the United States and anticipation of an interest rate hike by the Federal Reserve.
Woolfolk told Bloomberg the dollar may rise for another couple weeks, thanks to seasonal factors.
Then comes the decline
“The bad news is that until the Fed begins its process of normalizing interest rates, there are just too many factors weighing against the dollar for it to have any hope of a cyclical rebound.”
But a rate increase could come sooner than people think, he says.
“Once we get toward the end of the first quarter, I think the Fed is in a very good position to signal their intent to begin normalizing interest rates.”
So at that point the greenback can rally once more.
Solid U.S. economic growth will also help the dollar at that point, Woolfolk says.
“We’re going to see a return to the old normal economic growth, rather than the new normal of half growth.”
Others say a sustained U.S. economic rebound will ultimately help the dollar as well.
“Fundamental factors will be more favorable for the dollar" in 2010, Vassili Serebriakov, a currency strategist at Wells Fargo, told CNBC.
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