For investors looking beyond the US all this is a reminder to do one’s homework. The factors mentioned here – interest rates, the dollar, and the extent of local currency borrowing or local bond markets, and whether exports are priced in dollars or something else – all matter. And they all vary from market to market; in some emerging markets a stronger dollar might be a reason to invest.
Lastly, as usual there is no guarantee that an end to QE 1-2-3 will lead to a higher dollar. The chart of the Fed’s Broad Trade Weighted Index of the dollar leaves the next move far from clear.
About David Blitzer
David M. Blitzer is managing director and chairman of the Index Committee with overall responsibility for index security selection, as well as index analysis and management.
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