Dollar Bulls Must ‘Make Their Case,’ RBS’s Ruskin Says
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Thomas R. Keene and Matt Townsend
Oct. 30 (Bloomberg) -- The dollar will extend its decline against its major counterparts next year until the Federal Reserve raises interest rates and reduces liquidity, according to Alan Ruskin, a currency strategist at RBS Securities Inc.
“The burden of proof is on the dollar bulls to make their case,” Ruskin, based in Stamford, Connecticut, said today in an interview on Bloomberg Radio. “Interest rates are so low in this country, and that’s propelling the U.S. toward this buildup of liquidity and using the dollar as the funding for much of the risk taking that’s taking place. That’s an ongoing story until the Federal Reserve starts withdrawing liquidity.”
The dollar declined to $1.5063 per euro on Oct. 26, the weakest level since August 2008, as evidence of a global economic recovery encouraged investors to sell the greenback to buy higher-yielding assets.
Ruskin said the dollar may strengthen through the end of the year and then weaken again beyond $1.50 per euro as investors focus on U.S. debt and the economy.
“There will be some risk position squaring before year- end,” Ruskin said. “In terms of longer-term fundamentals, most people are still on the short-dollar trade and believe the dollar has further to go.” A short position is a bet a currency will decline.
Fed policy makers repeated after their September meeting that they will keep the target rate for overnight lending in a range of zero to 0.25 percent for an “extended period.”
U.S. government borrowing will weigh on the dollar, according to Ruskin.
“The fiscal dynamics is a huge problem going forward,” he said. “You do need to grow your way out of the problem or make some hard choices on taxes or expenditures, none of which seems to be forthcoming from Washington.”
To contact the reporters on this story: Thomas R. Keene in New York tkeene@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net
Last Updated: October 30, 2009 10:40 EDT
