问答题 International investors seem incapable of ending their love affair with the dollar. America"s economy has slowed sharply this year, yet its currency has risen to a 15 year high in trade weighted terms. (46) Against the euro the dollar touched $ 0.88 — 8% higher than in early January and close to the level at which the European Central Bank and the Federal Reserve jointly intervened to prop up the European currency last September. Why is the euro looking sickly?
There are plenty of theories. One is that the markets do not trust the ECB: (47) the euro area economies are not immune to America"s downturn, yet the central bank still seems more concerned with fighting inflation than with supporting growth; another more plausible explanation is that, in an uncertain global economic climate, the dollar has resumed its traditional role as a safe-haven currency. Most economists reckon that the euro is undervalued and expect a rebound over the next year. One of the most optimistic is Goldman Sachs, which is predicting a rate of $1.22 in 12 months.
But an analysis by David Owen, an economist at Dresdner Kleinwort Wasserstein, gives pause for thought. (48) He has found that, over the past decade, movements in the real exchange rate of the euro against the dollar have closely reflected the difference between productivity growth in the euro area and in America. When productivity growth in America has been faster than in Europe—as it was in most of the late 1990s—the euro falls, and vice versa. This is exactly what economic theory would predict: countries with faster productivity growth in the traded goods sector should see rising real exchange rates. Mr. Owen uses monthly data for productivity growth in manufacturing, a good proxy for the traded goods sector. Using annual productivity data for the whole economy (which are available over a longer period), the broad relationship between the exchange rate and relative productivity growth in America and Europe seems to have persisted for most of the past 30 years.
Mr. Owen reckons that, in the short term, America"s downturn will reduce the productivity gap between America and the euro area, and so boost the euro. (49) But in the long term, he expects productivity growth to remain faster in America—in which case, a sustained rise in the euro is unlikely over the next few years. Only if the downturn completely kills the belief in America"s new paradigm, and its productivity growth plummets, will the euro be able to rebound more permanently .
The strength of the dollar this year does indeed seem to hinge on a belief among investors that America"s slowdown will be brief, and that in the longer run America remains the best place in which to invest. (50) But they may be underestimating the potential for productivity gains in Europe, as the single currency boosts competition and encourages firms to exploit economies of scale through mergers and acquisitions. The adoption of more flexible working practices in many countries should also help to improve productivity.
Studies in America suggest that the bulk of its productivity gains from information technology come from the use of it rather than from its production. So the euro area, too, should start to enjoy productivity gains over the next decade, as it makes fuller use of it. If you believe that Europe really is starting to change, buy Euros. If not, stick with the darling dollar.