According to Wolfgang Koester
"The dollar is the currency to watch next year for a less exciting – though no less impactful – reason: the likelihood of it strengthening is much higher than weakening, and that appreciation will hurt multinationals that are not prepared. What makes the challenge greater is that the dollar won’t strengthen equally across the board, but will against some currencies that mean quite a bit to corporations."
He goes on to say
"Why is the dollar likely to rise? Because:
- With the appointment of Janet Yellen as the new head of the Federal Reserve, there are expectations of a bit more inflationary environment – the kind of environment that would result in rising interest rates and increased attractiveness of the dollar. Furthermore, the Fed is poised to roll back its bond buying as soon as the economy appears healthy enough to grow on its own. While the Fed kicked that can down the road this year, it can’t do so forever, and most signs point to the economy being healthy enough sometime in 2014.
- We are not likely to see a stronger euro. While it appears that Europe is emerging from its deep and long recession, the EU is not out of the woods yet; if the euro strengthens significantly, that could stymie the little momentum the economy has. So the European Central Bank will likely do everything it can to keep the euro down.
- Weakness in the yen will continue. Prime Minister Shinzo Abe’s depreciation of the yen to drive Japanese export competitiveness, in an attempt to kickstart the economy, has worked well in the year since it began. The Bank of Japan has articulated a goal of 2% inflation, well above the current levels below 1%."