The dollar, yen and Swiss franc may weaken this year against 2008's biggest losers in the currency markets as the global economy starts to recover, the largest foreign-exchange strategists and investors say, Bloomberg reported.
The winners will be the Brazilian real, Indonesian rupiah and Polish zloty as investors return to higher-yielding assets, according to Bloomberg News surveys. The dollar may strengthen versus the euro and Japanese yen, while dropping against the British pound.
"Our strategy for 2009 is to gradually increase risk," said Maxime Tessier, who manages $151 billion as head of foreign exchange in Montreal at Caisse de Depot et Placement du Quebec, Canada's largest pension-fund manager. "A year from now, I definitely want to be on the short side on the dollar. We'll see capital flows out of the U.S. again."
While the International Monetary Fund cut its 2009 growth forecast for the world economy to 2.2 percent in November from 3.9 percent, investors are growing more confident as central banks lower interest rates and governments earmark trillions of dollars for fiscal stimulus. The Dollar Index that tracks the currency against six of the U.S.'s biggest trading partners fell 6 percent last month, the most since July 1985, after rising 18 percent from June to the end of November.
The dollar lost steam as the Federal Reserve cut its target rate for overnight loans between banks to as low as zero and poured $8.5 trillion into the financial system. Treasury yields fell to records last year and rates on bills dropped below zero last month for the first time as investors sought the safety of government debt.
Faster economic growth will cause the dollar to weaken to 2.30 against the real from 2.3145 at the end of 2008, 1 percent versus the rupiah to 11,000 and 2.3 percent to 3.04 per zloty, according to the strategist surveys.
The pound may strengthen 3.5 percent to $1.51, while the euro will depreciate 8.4 percent to $1.28, the strategists said. The yen, last year's best-performing major currency, will lose 10 percent to 100 yen, they said.
Lawrence Goodman, head of emerging market currency strategy at Bank of America Corp. in New York, says countries that prove better at withstanding the global slowdown should benefit as the flight to safety slows. The dollar will decline 18 percent against the real and 19.5 percent versus the zloty, he said.