With the dollar hitting a 26-year low against the pound, Foreign & Colonial says "savvy investors" would be best to resist temptation to ditch US equities, as the currency will rise again.
F&C investment trust manager Jeremy Tigue says although a pound may be over the $2 mark, there are still opportunities to be found.
"The last time it (the dollar) was pitted against the pound at over $2 for any significant length of time was in 1979 at the beginning of the North Sea oil boom, which lead to a sharp spike in oil prices, he says.
UK investors saw the currency value rise from $1.60 to $2.40.
Tigue says today’s exchange rate has totally different characteristics.
“From a high of $1.38 to the £1 on 13 June 2001, the dollar has felt the strain of a widening budgetary and trade deficit and has followed a downward trend not just against the pound sterling but against the Euro and other major currencies worldwide," he says.
Tigue noted the trend could reverse, potentially boosting sterling investors.
"The pick up in UK and European growth over the last few years should see demand for US exports continue to increase not least because of today's more favourable exchange rates,” he says.
“The US budgetary deficit is also closing. After making a swathe of tax cuts in 2000 and 2001 to avert a recession, recent tax increases are slowly starting to make their way through the economy and should relieve any budgetary fears."
An improvement in the US budget and trade would drive a strengthening of the dollar, but Tigue could not predict a time for the resurgence.
"In the meantime, US exporters and companies with overseas earnings should benefit and by default, large blue chips like General Electric and ExxonMobil look attractive,” he says.
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