A further jump in the U.S. dollar could impact the Fed's timing for hiking interest rates, says a currency strategist. Fred Katayama reports.
Americans traveling overseas are feeling a lot richer. The mighty dollar rocketed to multi-year highs against the euro and yen. Americans can buy a euro for just $1.07 now, compared to about $1.40 last May. It's the furious pace of the dollar's climb that has surprised currency strategists, like Societe Generale's Sebastien Galy. SOUNDBITE: SEBASTIEN GALY, SENIOR CURRENCY STRATEGIST, SOCIETE GENERALE (ENGLISH) SAYING: "Right now, FX is overshooting the mark in terms of interest rate differentials, different forms of metrics you can look at. It's actually very difficult to assess." A stronger currency can be a double-edged sword. A robust buck makes imported goods cheaper for American consumers. But it also makes products produced by U.S. companies more expensive for foreigners, hurting American corporate earnings and stoking inflation overseas. Economist John Dunham says that's good for the U.S. economy so long as people don't speculate. SOUNDBITE: JOHN DUNHAM, PRESIDENT, JOHN DUNHAM & ASSOCIATES (ENGLISH) SAYING: "If there's demand for U.S. goods, there's demand for U.S. assets, there's demand for U.S. services, and that pushes up the dollar, and that's a good thing. But, if just people are taking euros or other currencies and using that to buy empty apartments in Manhattan, which as we know is a big thing here, then that's not really good for the dollar or the economy." Stoking the dollar: the U.S. economy is growing faster than other big economies. And the U.S. is getting set to raise interest rates just when other countries and regions like the European Union are launching bond buying operations to lower their rates to stoke growth. Galy says the dollar's climb could affect the Federal Reserve's timing for hiking rates. SOUNDBITE: SEBASTIEN GALY, SENIOR CURRENCY STRATEGIST, SOCIETE GENERALE (ENGLISH) SAYING: "We ran a survey right now, and the initial response suggests we need to see the dollar rise by another 10 percent for it to really impact the pace at which the Fed tightens." He says the euro may be just weeks away from hitting parity with the dollar. But he believes the dollar has shot too far north, and that further gains for the greenback could be limited.