Tags: UBS | dollar | inflation | Fed

UBS Strategist Mohi-uddin: Dollar Will Rebound Soon

By    |   Thursday, 03 July 2014 09:57 AM

The Dollar Index, which measures the greenback's value against a basket of six other major currencies, has dropped to a seven-week low amid the Federal Reserve's confirmation that it is in no rush to raise interest rates.

But Mansoor Mohi-uddin, chief currency strategist for UBS, sees the dollar rebounding soon, as rising inflation pushes the Fed to advance the timeline for a rate increase, CNBC reports.

Most economists don't expect the central bank to hike rates until the second half of 2015. Consumer prices have risen 2.1 percent in the year through May.

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The Fed has a 2 percent target for the personal consumption expenditures price index. That gauge climbed 1.8 percent in the year through May.

"America's economic recovery is beginning to push inflation higher," Mohi-uddin writes in a commentary obtained by CNBC.

"The dollar is likely to rebound from its current summer softness, as investors start to anticipate when the Fed will begin raising interest rates in 2015. We continue to maintain a constructive view on the dollar this year."

The Dollar Index fell to 79.76 Monday, its lowest reading since May 9. It stood at 79.93 late Wednesday.

Forbes Media Chairman Steve Forbes maintains that a strong currency represents the critical prerequisite for economic strength.

"Weak money always begets economic disasters," he writes on Forbes.com. But when the value of money is fixed, which the dollar was for 180 years under the gold standard, it generates long-term growth, Forbes says.

"When you undermine a currency, money flees to commodities and other hard assets," he argues.

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Economy
The Dollar Index, which measures the greenback's value against a basket of six other major currencies, has dropped to a seven-week low amid the Federal Reserve's confirmation that it is in no rush to raise interest rates.
UBS, dollar, inflation, Fed
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2014-57-03
Thursday, 03 July 2014 09:57 AM
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