In a poll conducted recently by Reuters, 35 of 41 foreign exchange analysts agreed that the US dollar has begun a multi-year recovery. That assessment came after the dollar’s rally in August, in which it staged its strongest recovery against the euro in eight years. In’s poll last week on the same subject, most of you opined that the dollar’s rally nonetheless means there’s going to be more pain amid a protracted recovery. However, 45% of you took the more upbeat view that the dollar’s renewed strength signals the beginning of a recovery. Marc S. Miller, EVP at Winoker Realty Co., left no doubt about where he stands on this question.

“There’s going to be more pain ahead. It’s going to take a significant amount of time in the cycle to sort out issues of companies downsizing, volatility in the way that companies that financial services companies have been running themselves—especially with some of the larger ones like Lehman Bros. All of this tells me that the system is not clean and still has quite a while of really getting back significant confidence. The dollar’s recovery has been pretty aggressive; it took the euro six months to climb against the dollar to a certain point, and the dollar recovered that point in six weeks. But I think the dollar’s recovery has very little to do with what’s happening on the ground in the United States. The dollar is getting more attractive because there’s been some optimism about how the US has been dealing with issues, but there’s definitely more pain ahead.

“The exchange rate against the dollar changed so dramatically to the benefit of foreign investors that the value that they see will continue, albeit diminished. They’ll still be here spending.

“I’m not surprised that some people see the start of recovery. In any poll, there’s always going to be a minority and a majority. It’s never going to be 100% one way or the other. I think a lot of people convince themselves that when they see the slightest blue sky, tomorrow’s going to be sunny. That’s just an attitude that they maintain in order to continue to do their business. But it’s not necessarily based on any concrete economic proof. It’s more market psychology within their own life or their firm’s life that they would give an opinion like that, but I don’t think it’s based on empirical evidence. The other side, that there’s going to be more pain ahead, has more empirical evidence in support of it. We just haven’t sorted out enough stuff. It was just four months ago that Bear Stearns went under.”

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