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Dollar 'success story' good for stocks: McCulley

The stronger dollar is a net-positive for the U.S. economy and the stock market, former Pimco chief economist and managing director Paul McCulley said Friday.

"My biggest call last year at Pimco was we we're in a secular bull market for the dollar. The United States is escaping the liquidity trap," he added—saying a strong dollar is a natural progression.

A long-time dollar bull, he said on CNBC's "Squawk Box" that the currency rise is a "success story for America" from a macroeconomic standpoint and for stock investors. He acknowledged it's not all positive for some sectors of the economy, such as multinational exporters.

A strengthening dollar puts downward pressure on inflation, which the Federal Reserve would like to see higher. This in turn, could keep the Fed on the sidelines for longer, McCulley argued.

"For what we do every day in the marketplace, it implies a kind and gentle monetary policy for a longer period that would be the case without it." He cited as evidence the strong stock rally Wednesday, after the Fed ended its two-day policy meeting with a more dovish message on the prospects of an interest rate hike. "Wall Street celebrated two days ago." But he did say the Fed indications could cap the dollar's rise in the short term.

As for U.S. economic growth, "it's not a gangbuster economy," but he described overall activity as "pretty nice."

McCulley stepped down last month as Pimco chief economist, a role he came out of retirement for nine months earlier at the request of co-founder Bill Gross.

But after Gross left in September for Janas Capital Group, McCulley decided to leave, too—saying his "existential reason" for taking the job had left the building. He said he has no plans to follow Gross to Janus.

McCulley said he would expect Pimco to "flourish" in the years to come, as it transitions from a founder-driven culture to a more corporate environment. Pimco is owned by German financial services giant Allianz SE.

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