Bucking a Trend: Why the Dollar Could Rally in 2011

Despite a likely third straight year of $1 trillion U.S. budget deficits, and the U.S. Federal Reserve's controversial quantitative easing program, the U.S. dollar has basically remained flat against the world's other major currencies. Compared to the British pound, it has barely budged over the past year, going from $1.6153 to $1.6093. At the same time, it fell a relatively small 4% against the Canadian dollar and went up 5% against the euro.

Admittedly, the dollar lost a substantial 10% of its value against Japan's yen, but unless you're willing to "park" your money in Japan's famously low-interest banks for almost no return, the yen is not a worthwhile option. By extension, that same drive for yield/return will probably discourage many institutional investors from trading in their dollars for yen.

If the dollar's resiliency in 2010 didn't surprise you enough, try this on for size: There's a decent chance the dollar may rally in 2011, rising in value against other major currencies. Here's why:

U.S. budget deficit reduction progress. First, it seems likely that there will be progress in reducing the budget deficit in 2011. That may be hard to believe, given that the Democrats and Republicans in the past week courageously said "you go first" regarding entitlement reform, but the important point is that the structure of the debate has changed. The debate is no longer focused on spending increases; instead, it's looking at how much will be cut and where the slashing will occur.
Analysis: Dollar bullish.

Euro-zone debt concerns. The European Union has made strides addressing its sovereign debt woes; for example, it's poised to increase the size of its bailout fund. Still, at least two large-debt nations, Spain and Portugal, remain under "24-hour observation." While the pair will probably will avoid a bailout, the chance that they might need one -- and the negative impact that such a bailout would have on the euro -- is likely to keep investors nervous about the euro for the next year.
Analysis: Slightly dollar bullish.

Dollar as global reserve currency. Eventually, globalization may lead to the adoption of several reserve currencies. In fact, the euro, yen, British pound and Swiss franc already play supporting roles. For the time being, however, institutional investors are not yet ready to abandon the dollar-dominated reserve currency system -- a status that continues to boosts the dollar's value.
Analysis: Dollar bullish.

U.S. economic expansion. Finally, there's the U.S. economy. After the longest and most painful recession since the Great Depression, the world's largest economy appears to be headed for a better-than-adequate performance in 2011. U.S.-based companies, including many multinationals, are lean, cash-flush (they've amassed about $2 trillion in cash), and are well-positioned to take advantage of the global growth cycle. That bodes well for earnings growth. And because these are largely dollar-denominated investments, it will increase demand for dollars.
Analysis: Dollar bullish.

So whether you're talking about the deficit reduction, Europe's debt woes, currency reserves or the multinational-led U.S. economic recovery, the stars appear to be lining up for a decent year for the dollar. Of course, the outbreak of another war involving the U.S., an unforeseen natural or man-made calamity (such as terrorism) or a major and sustained disruption in the flow of imported oil could all result in a bad year for the buck. But minus those, look for the dollar to hold its own in 2011.

View all Articles » Joseph Lazzaro is the former managing editor of financial news web sites WallStreetEurope.com/WallStreetItalia.com, based in New York. Prior to graduate training in U.S. public policy and international economics, Lazzaro also served as a copy editor and staff writer for The Hartford (Connecticut) Courant.

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Personal Loans - Bringing The World Closer Together One Dollar At A Time

Feb 12, 2011 |Comments: 0 |

Personal loans have been around for a long time in one form or another. Obtaining a personal loan is now as easy as clicking through a few web pages on the net. Lending firms and individuals from all over are now working to meet the terms and demands of the consumer. When you're having an awfully hard time finding someone to loan you the bit of money you need these are excellent alternatives, and there is almost always someone out there to lend you the money.

With these loans you don't have to put up your vehicle, or your house, or anything else. This is a loan made in complete confidence that the borrower will have the money paid back in agreed upon fashion. Obtaining such a loan is done by simply using one of several websites set up for you to state how much you need to a group of lenders. If a loan officer thinks he or she can accommodate your needs they will contact you with an offer for your approval.

Generally, the interest rate for a loan like this can be a good bit higher than what you'd normally expect, but in most cases this is the only option for getting cash fast. On the plus side, you will most likely still pay far less than if you went with your bank. Banks can often be a big hassle to do business with for the sake of personal loans, and many consumers prefer the convenience of dealing individually with an investor.

Lenders prefer this method, too, because they stand to earn a much healthier chunk of change from the transaction. Furthermore, they are completely in charge of their financial endeavor. There is usually no need to bring in a third party, so they can decide what financing charge they are comfortable with as well as who or what they are comfortable investing in.

Being able to complete business one on one is a very large appeal for this type of loan. It is much more simple than other types of loans. Investors can locate personal loans to back up that really benefit a cause that they trust in or give a family a leg up. The person who is benefiting from the investment is usually able to get a much needed financial break at a reasonable interest rate. The things that can be taken care of through such a transaction are pretty much impossible when working with a bank.

As the globe gets closer and smaller more investment opportunities are popping up everywhere. Offering individuals the opportunity to make such powerful decisions together is a great benefit to the world. This type of arrangement benefits all parties in a great way. Whether you are seeking to get into the loan business or find a loan, the chances for doing so successfully are increasing every day.

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