Best Time to Buy US Dollars

January 12th, 2009 | us -

Readers Question: I am researching changing currency exchange rates and was hoping to get a professional opinion on when in 2009 would be the best time to buy US dollars.

Firstly, I cannot offer a professional opinion on the best time to buy US dollars. I don’t think anybody will be able to tell you the ‘best time to buy US dollars’ with any certainty. If you go to different economists you will get different forecasts for the US dollar in 2009.

I have tried predicting exchange rates – sometimes they turn out right sometimes they turn out wrong.

My feeling is the dollar will continue to be weak in 2009 because

Interest rates 0 – 0.25%
Economy still declining, more bad news could come in 2009
US public sector debt continues to grow at an alarming rate.
Quantitative easing is increasing monetary base and this is liable to depreciate the value of the dollar.
Current account deficit persists.

The fundamentals of the economy point to a weak dollar. But, even when fundamentals are weak this is not a guarantee of the dollar’s devaluation. In particular it is hard to spot a strong currency as many economies face difficulties.
The Euro is starting to look overvalued as the Euro economy goes into recession.
Last October the dollar rallied because people still saw the dollar as a safe haven compared to emerging economies.

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