Tags: Hoefert | strong | dollar | export

UBS' Hoefert: Don't Fear a Strong Dollar

By    |   Friday, 13 February 2015 01:11 PM

The dollar has soared to multi-year highs against a range of currencies in recent weeks, and that has some economists worried.

They fear the impact on U.S. exports, as a stronger dollar makes U.S. products more expensive in foreign currency terms. There is also concern that U.S. multinational corporations will suffer, as their foreign revenue is now worth less in dollar terms.

But Andreas Hoefert, chief economist at UBS Wealth Management, isn't one of the worriers. "The U.S. currently has little cause to be concerned," she writes in a commentary for CNBC.

The export argument doesn't cut muster, she says. That's because the United States "doesn't rely on foreign trade and derives its growth first and foremost from domestic demand."

Exports account for only 13.6 percent of our GDP. In the eurozone and China, exports account for almost double that percentage of GDP.

"The U.S. does not need to engage in the [currency] war and fuel it further, given that exports are relatively peripheral to its growth," Hoefert says.

"The U.S.' overall attitude to the strengthening dollar seems the right one: keep cool, carry on, focus on your domestic demand and let other countries fight the currency war."

That currency war raises serious risks, many experts say.

Currency volatility has soared to its highest non-crisis level for the last 20 years, according to currency strategists David Woo and Vadim Iaralov of Bank of America Merrill Lynch, The Wall Street Journal reports.

"There is a growing consensus in the market that an unspoken currency war has broken out. For many countries facing zero interest rates and binding fiscal constraints, the only policy tool left at their disposal to stimulate growth is a weaker exchange rate," they say.

The increased volatility raises the risk of international trade and investment transactions. "This will likely exact a toll on global trade and capital flows," Woo and Iaralov say.

© 2020 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Finance
The dollar has soared to multi-year highs against a range of currencies in recent weeks, and that has some economists worried.
Hoefert, strong, dollar, export
315
2015-11-13
Friday, 13 February 2015 01:11 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved