(Bloomberg News) Fidelity Investments, the Boston-based fund company that oversees $1.64 trillion, is bullish on the U.S. currency just as Pacific Investment Management Co. and Goldman Sachs Group Inc. (GS) are warning investors against buying.
"The value of the dollar is close to a bottom," John Carlson, manager of the Fidelity New Markets Income Fund (FNMIX), wrote in a report yesterday on the company's website. "I've never been more optimistic on the long-term prospects of the U.S. dollar and U.S. economy."
America's currency will strengthen over the next 18 months to three years because of competitive advantages in the U.S. including the rule of law, a strong education system and labor mobility, Carlson wrote. The greenback is cheap now, according to the report.
The dollar has dropped 13 percent in the past year against a trade-weighted basket of six currencies, even after rallying more than 3 percent from a 33-month low set May 4. Pimco and Goldman Sachs argue that overseas markets will lure money managers in the coming years with faster economic growth, higher interest rates and stronger government finances.
The U.S. currency slid 0.7 percent against the euro to $1.4184 as of 1:03 p.m. in London.
Alternatives To Treasuries
Bill Gross, who runs the $240.7 billion Total Return Fund for Pimco in Newport Beach, California, said investors should "revolt" against the Federal Reserve's low interest rates. Fund managers should seek alternatives to U.S. bonds, "including developing/emerging-market debt at higher yields denominated in non-dollar currencies," he wrote in a commentary this month on the company's website.
Gross' Total Return Fund, the biggest bond fund in the world, returned 7.83 percent in the past year, beating almost four-fifths of its competitors, according to data compiled by Bloomberg.
Carlson's New Markets Income Fund gained 14.1 percent, which topped almost two-fifths of its peers, the data show.
Goldman Sachs, the U.S. bank that lost money from trading on only one day in the first quarter, cut its dollar forecasts on May 18, saying growth in the world's largest economy is lagging behind other nations.