With volatility in markets increasing through the end of 2014, we believe many investors will continue to look at different ways to manage risk in their portfolios. In our view, a long-dollar strategy could be one way to reduce risk during uncertain markets. Should our thesis prove correct, we believe the value of the U.S. dollar could appreciate against a basket of foreign currencies in the coming year.
1Sources: J.P. Morgan, Bloomberg. As measured by the J.P. Morgan Real Broad Effective Exchange Rate from 4/30/11 to 11/30/14.
2Sources: J.P. Morgan, Bloomberg. For the purposes of this analysis, we focus on estimates of real effective exchange rates (REERs).
3Sources: J.P. Morgan, Bloomberg.
4Source: WisdomTree, as of 11/30/14.
5Source: Bureau of Labor Statistics.
6Source: OECD.
7Source: Bloomberg.
Important Risks Related to this Article
Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations.