Wednesday, July 20, 2011

AllianceBernstein: all major currencies have weaknesses

Strategists at the fund AllianceBernstein revoked their bets versus the greenback changing the outlook to neutral as the euro area debt crisis escalates.

It’s necessary to note that though the fund managers’ sentiment towards US dollar has improved they didn’t become positive on dollar taking into account high indebtedness of the United States and its budget problems. In addition, the economists don’t think that the economic growth will slow down making dollar popular safe haven. AllianceBernstein expects slow and uncertain economic recovery and is cautiously bullish on the market.

The specialists are now bearish on the single currency and British pound and bullish on Scandinavian currencies and Swiss franc. According to them, the downside pressure on euro is stronger due to the ECB policy that is keener on targeting inflation while some economies of the currency bloc are too weak to bear tighter monetary policy.

Analysis conducted by the OECD on the basis of the purchasing power parity shows that US dollar is 8.3% undervalued versus euro. American currency lost 5.8% this year versus the European one. The situation has a bit improved as it managed to gain 2.3% in July.

All in all, the specialists say that it’s not the time for long-term trade and investments as all major currencies – dollar, yen and the European currencies – have their drawbacks, so it’s necessary to adjust to the changing conditions.

published by FBS Holdings © 2011