Steen Jakobsen, chief economist for Saxo Bank in Copenhagen (Denmark), shares his bullish views on the US dollar… highlights below:

Clearly the US has debt issues on their own, but currencies are relative trades. To me we are entering long-term up cycle for the US dollar. The final QE/Printing of money will come in Q1 of 2012 and could cement the low, but I am willing to start overweighting US dollar relative to Europe, not Japan, and further down the road to go full in.

I suggest the EUR/USD is out of touch with relative rates, funding needs, and relative dynamics of the economies.

Four Reasons to be Bullish on the US Dollar:

  1. The EU debt crisis – when ECB becomes lender-of-last-resort we will see 10 figure move lower.
  2. Relative growth differences – The US is more dynamic and with only “one master” . – i.e. Congress vs. Europeans 27 members and lacking fiscal union.
  3. Competitiveness. US will able to compete on labor costs with close to 20% real unemployment and incoming tax incentives.
  4. HIA – Homeland investment Act – as stated above the Super Committee is trying to get a reduced tax of 5.25% in place.

My bullishness is relative, but the biggest contributors to long-term wealth tends to be your choice of currency. I have a target of 100 in DXY for next year, so a 25% rise in the US dollar during 2012 – and in EURUSD terms the expected move is changed range from 1.30/1.40 now to 1.20/1.30 on ECB rolling over, another 5-6 figures on interest rates, and then HIA II we end around 1.10-1.15 for 2012 end target.

Source: Mish’s Global EconomicAnalysis

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