Should We Worry About the Dollar?

Focus: Currencies

Chris Gaffney Image Chris Gaffney World Markets Senior Vice President, EverBank Wealth Management

Many are concerned with the amount of dollars that have been dumped on the market, and worry a weak dollar may have some bad global ramifications, so we asked Chris Gaffney of EverBank World Markets to give us his take.

Gregg Early: We are here with Chris Gaffney, Senior Vice President of EverBank World Markets. Chris I wanted to ask you about the euro. It seems like it's strengthening here, but is that just something that's happening before the US elections or is this a real trend?

Chris Gaffney: Great question. The euro has been strengthening recently, with the success of the Italian debt auction last week, but overall on the medium term we have seen the euro moving higher after reaching some lows earlier this year. Mainly, I think, because of the uncertainty surrounding the US elections.

Anytime you have uncertainty, it is typically seen as a negative for asset valuation, because markets and investors do not like uncertainty in the markets, and certainly the election with Romney's debate performance have made the decision less certain.

I think before the debates, it looked like President Obama was going to cruise through this election. Now with the recent debate performances, I think Romney has come back into everyone's mind as maybe a potential president. So it is certainly a result of the uncertainty surrounding our election, and also that fiscal cliff that's hanging out there.

Gregg Early: It also seems like the numbers from China have been encouraging. There's a little bit more hope that the Chinese economy might be pushing forward, which would also be somewhat helpful for European companies since they're pretty heavily invested over there, right?

Chris Gaffney: Yes...and on the flip side, bad for the dollar, because a lot of the investing into the US dollar recently has been as a safe haven, or as a liquidity haven for investors.

So with better news out of China, the markets had almost priced in a hard landing by China, and the recent data shows that the talk of China's demise was overblown.