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Fed Rate Rise Speculation "Nonsense": Strategist

The recent speculation that the Federal Reserve may be forced to raise rates sooner because of a faster-than-expected improvement in the economic outlook is baseless, and the dollar can only go down, Steven Nigg, CEO of SWISS E TRADE, told CNBC Wednesday.

"That's nonsense. The Federal Reserve will not put into jeopardy their program to rebuild the economy that they've worked so hard for," Nigg told "Worldwide Exchange."

"I think the major topic is the dollar's role as the sole reserve currency for many countries," he added.

Because countries which have a large current account surplus with the United States have accumulated a lot of dollars, they find themselves in the position of looking for alternatives among major currencies, according to Nigg.

"It's the implied fear of it, the association that what might happen in the future is causing these governments and central banks to rethink at the present their dollar holdings," he added.

Asked whether he could see a clear major trend for the dollar, he said "Yes, it's down."

"The slight correction of the dollar in the last few days… it's proven to be false, and we think this is likely to continue," he said

"The main beneficiary of this will be the euro . We see within the next month for the euro at $1.4750," Nigg said.

The political situation in the UK, where Prime Minister Gordon Brown is contested by his party after bad results in the European Parliament election, means there will be fewer gains for the pound , and Nigg said it is likely to trade at $1.6675 in the period. The Swiss franc is seen at $1.04, while the yen may strengthen to 94 yen to the greenback.

The Fed's quantitative easing will be the main culprit for the dollar's fall and for future inflation, Stephen Gallo, head of market analysis at Schneider Foreign Exchange, also told CNBC.

"When you debase and when you insert worries about the world's reserve currency, it's going to fall, the markets are going to force a run on it and it's going to push up commodities prices," Gallo said.

"I think it's going to be very difficult for them to manage these stagflation risks that crop up on the horizon," he added.

Contact Europe: Economy

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