The term “currency strategist” could often be described as an oxymoron. Most studies show that forward exchange rates have little predictive power, and most foreign-exchange forecasts are backward-looking; they chase momentum and the macro consensus, and their accuracy is even lower than most other economic forecasts. Thus, former Fed Chair Alan Greenspan used to say that the current spot rate is almost always the best estimate of the expected future rate.
This is certainly true in the near term, when forecasting the exchange rate often comes down to simply charting and technical analysis (lines of support/resistance, chart patterns, oscillators, etc.). Over longer term, however, currencies tend to adhere to their economic fundamentals, and therefore, the accuracy of forecasts tends to increase. In this Economics Weekly, Richard de Chazal reassesses the current dollar regime and why we might now be at a turning point for the currency.