Rabobank: US productivity strength to support dollar, but global recovery to limit upside

The U.S. dollar could continue to draw strength from the country’s productivity advantage, which has been a central driver of its performance since the 2008 global financial crisis, Rabobank’s Jane Foley said in a note on Tuesday:

• productivity gains fuel wealth creation
• also act as a strong offset to inflation risks
• the U.S. economy’s heavy concentration of technology companies supports long-term competitiveness despite concerns over lofty valuations

Foley said the U.S. remains better positioned than most major economies to generate sustained productivity growth, helping underpin the dollar even as inflation pressures moderate. But cautioned that further appreciation is likely to be measured, as other regions show signs of economic renewal

• Japan’s emergence from deflation
• Africa’s resource wealth
• Germany’s planned fiscal stimulus
• a trend of central banks increasing gold holdings

as potential diversifiers that could temper demand for U.S. assets and slow the dollar’s ascent.