Influential investor Raoul Pal, Goldman Sachs alum who successfully predicted the financial crisis in 2008 says the rally could go on for another three to four years, taking a key dollar index another 30% higher.
“Looking at the shortfall of dollars and what is happening in the world right now, I think it could probably rally something like 75% from its low, so that’s still a long way from here. My personal target for the last six year has been the euro goes to 75 cents against the dollar and the yen at 200,” he said at a conference in London on Tuesday.
For the ICE Dollar Index DXY, +0.19% Pal predicts a jump to 130, up from the 101 it currently trades at. The greenback embarked on its yearslong rally in May 2014—shortly before former Federal Reserve Chairman Ben Bernanke sparked the so-called taper tantrum—when it traded just shy of 79.
Pal bases his ultra-bullish dollar forecast on experiences from previous bull markets, rising U.S. interest rates, massive dollar debt abroad and President-elect Donald Trump’s protectionist trade agenda. So basically what he calls a perfect storm “where probability is widely on our side, so that almost whatever the economic outcome, the dollar goes higher.”
The US dollar has only really had two bull markets since it was allowed to float freely in the 1970s. In the 1980s, when it almost doubled, and in the 90s when it jumped around 50%.
“This time, the dollar is only up 29%, so that’s the smallest dollar bull market in history if it were to stop there,” said Pal, who also founded Global Macro Investor.
“Dollar bull markets go on for a long time, five to six years and they power ahead. And the corrections are maximum 10%, usually less.”
However, this is only the third dollar rally. so there is not much history