U.S. dollar may have entered multi-year downtrend - Wells Fargo

"On a trade-weighted basis, the U.S. dollar has been in an uptrend since mid-2011. However, after reaching a 14-year peak late last year, the trade-weighted value of the dollar has dropped more than 7 percent," Wells Fargo Research Team explains.

Key quotes:

"Moreover, our currency strategy team looks for the greenback to fall further on balance in coming quarters, and they believe that the U.S. dollar has embarked on a multi-year downtrend."

"By reducing the foreign-currency price of U.S. goods and services, a weaker dollar should help to boost American exports. Growth in real exports of American goods has already picked up this year. If, as we expect, the dollar depreciates further, then shouldn’t U.S. export growth strengthen even more? Does a return to the “golden years” of 2004-2007, when real exports of American goods and services grew at an annual average rate of roughly 9 percent, lie in store?"

"Not so fast. Although economic theory posits that the real value of the dollar should have an inverse effect on real export growth, the empirical record shows that U.S. export growth is much more sensitive to changes in foreign economic growth than it is to changes in the real exchange rate."