Economist Sees Year-End Drop in Dollar Due to a Pattern of December Sell-Offs
Widespread hopes for a year-end dollar rally were doused by last week's news of the record monthly U.S. trade deficit. But even before the trade report, Lawrence J. Greenberg, an economist at Chemical Bank, New York, had figured that a late-December sell-off was all but inevitable.</br></br>In fact, Mr. Greenberg has predicted a late-December dollar decline for every year since 1981. In all but one period, his predictions proved right.</br></br>The 40-year-old former Federal Reserve economist doesn't use a crystal ball. His annual year-end forecast is based on the dollar's historic trading pattern in Decembers. In 13 of the past 14 years, the dollar has fallen in value between mid-December and New Year's Day, and has failed to do so only twice since the start of the modern floating exchange system in the early 1970s.</br></br>A nine-year veteran in Chemical's foreign exchange advisory service, Mr. Greenberg normally relies exclusively on fundamental economic factors in forecasting currency trends. But six years ago, with a shortage of any major factors in the typically dull holiday season, he recalled a series of end-of-the-year declines and saw a connection.</br></br>"I'm struck by the consistency of it," he says of the trend. "You're not going to get that by flipping a coin." He suggests that the dollar's performance in no other two-week period would reveal such a predictable showing over so many years.