Foreign exchange traders and analysts debating future movements of the U.S. currency were overwhelmingly bearish on the greenback and predicted a corresponding increase in volatility, with one pro arguing the U.S. dollar will weaken to USD2 against the euro in a decade. John Taylor, ceo at investment management and research firm FX Concepts, projected that the U.S. dollar is set for a long decline and based his prediction that the greenback will hit USD2 against the euro on previous dollar cycles.
Ronald DiRusso of the Sigma Fund at Northbridge Capital, noted that future dollar movements will be largely influenced by developing economies such as China. Dirk Morris, managing director and cio for currency at Putnam investments, noted Asia holds a plethora of U.S. dollar short-term bonds that need to be risk managed. This will likely be the next wave of liquidization and will provoke a sell off of U.S. dollars, he said.
The volatility of currencies is also likely to increase because it is easier to allow currency fluctuations to soften economic imbalances than to move interest rates, which hurts corporates and homeowners alike. Because central banks are less rigidly controlling currency movements and embracing the market as a means of transmitting monetary policy to the economy, the dollar looks to be headed downward while volatility is set to rise, he added.
