New Economist: 2005: Year of the resurgent greenback
リンク: New Economist: 2005: Year of the resurgent greenback.
Saturday, December 31, 2005
2005: Year of the resurgent greenback
For most currency strategists 2005 was the year that the ailing greenback, weighed by the burgeoning twin US deficits, would finally buckle. Instead, as today's Financial Times report, the Dollar makes biggest annual gain in 8 years
The dollar ended 2005 with its best annual gains against leading currencies for eight years as the Federal Reserve’s ongoing rate-raising campaign helped reverse the greenback’s three-year decline.
The dollar trade-weighted index rose 10 per cent in the last year, against a fall of 27 per cent over the previous three years. The dollar stood yesterday at $1.1790 against the euro, 0.4 per cent higher on the day, and more than 12 per cent higher over the year.
...The dollar has benefited over the year from a switch in market focus from the ability of the US to finance its trade and budget deficits to a steady stream of rate rises from the Federal Reserve.
The dollar gained almost 15% against the yen this year. The pound has slipped over 10% against the dollar, its biggest annual decline since the 1992 ERM currency crisis.
While almost everyone else was forecasting doom for the dollar, Steve Pearson at HBOS took a contrarian stance - and consequently became top currency forecaster in the annual Bloomberg survey.
Steve Pearson has a habit of betting against the crowd. At the start of 2005, while the three biggest foreign exchange traders were predicting continued declines for the dollar, he forecast that the U.S. currency would break a three-year losing streak against the euro as U.S. growth accelerated.
Pearson was right: The dollar gained 12 percent by September. That call and others like it made Edinburgh-based HBOS Plc, where Pearson leads a two-man research team in London, the most accurate currency forecaster in the 12 months through September, according to data compiled by Bloomberg. The ranking was based on forecasts by 44 firms for seven major exchange rates, conducted each quarter.But I doubt the greenback's resurgence would have been anywhere near as strong had the Fed not raised rates more aggressively than most expected at the start of the year. I will give my market tips for 2006 early next week.
UPDATE: Also worth reading is Stephen Jen's recent piece for Morgan Stanley, Currencies: What 2005 Tells Us About 2006:
We had an eventful 2005. The most important theme this year is that a large C/A deficit did not drive the dollar weaker. We correctly anticipated the dollar resurrection in 2005. However, we were wrong in expecting a sharp correction in the commodity currencies. Our call on the JPY was mixed, as we reversed the strong JPY call that we made at the start of the year in July, when we realised that the weak link in USD/JPY was in equity hedging. From these 2005 events, we draw some lessons to keep in mind for our 2006 outlook.
