While all of these points can help explain a portion of the current market moves, we believe this trend may just be getting started. In all three instances, there is a distinct element of persistence. In other words, these factors are unlikely to change overnight. As a result, we believe investors should consider allocating to currency strategies that are long the U.S. dollar rather than to a basket of foreign currencies.
1As represented by the Bloomberg Dollar Spot Index.
2Source: Bloomberg, as of 11/28/14.
3Source: Bloomberg, as of 11/28/14.
4Source: Bloomberg composite 2015 forecast, as of 11/28/14.
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 focused in Europe or Japan are increasing the impact of events and developments associated with the regions, which can adversely affect performance. Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations.