Given the divergence of central bank policies, currencies are among the most important investment topics today. If the U.S. dollar continues to strengthen, it may be a headwind to U.S. multinationals earning revenue abroad, while boosting foreign companies that are earning revenue in the United States.
As HEDJ, the WisdomTree Europe Hedged Equity Fund recently crossed $15 billion in assets, we’ve been particularly interested to see how global exporters within Europe have been responding to a weaker euro.
A big theme of the last six months has been the strength of the U.S. dollar and the weakness of foreign currencies, especially the euro. The euro started trending down as it became increasingly clear that the European Central Bank (ECB) would engage in a more aggressive monetary policy to combat deflationary trends in the eurozone.
The divergence between the European Central Bank (ECB) and the U.S. Federal Reserve (which may raise short-term interest rates at some point in 2015) makes it very difficult to argue for a stronger euro versus the U.S. dollar.
Recently, Professor Jeremy Siegel and I sat down with Brown Brothers Harriman currency strategist Marc Chandler. Given the European Central Bank’s (ECB) recent activities, most of the discussion centered around the euro.