Siegel on the Dollar - Fed may start tightening.

The fall in the dollar has generated a lot of angst among stock investors. But, as I noted before, the dollar is still well above the low reached in early 2007 when the U.S. economy and the stock market were riding high and our budget deficits were much smaller than today. Most of the decline in the dollar is due to the loss of the “safe-haven” premium that the greenback acquired during the past financial crisis. The dollar is not in a “state of collapse” or even near it. However, if it does break below its previous low, which means a further drop of about 6% measured against the DXY index of developed countries, the Fed should be put on alert that its zero-interest-rate-policy days are numbered. I have maintained that the Fed will have to start tightening next spring, a prediction that is far earlier than the consensus. If the dollar continues to slide, my conviction will be reinforced.

---Siegel Weekly Commentary 10.19