There is an interesting debate going on today on a Streeteasy message board about the implications of an appreciating dollar on foreign investment in Manhattan real estate. There are two schools of thought.
One basically assumes that confidence and appreciation of the US Dollar is good for foreign investment (my opinion), while the other side thinks that an appreciating dollar would cause foreign investors to dump the newly appreciated asset.
Surely if the dollar were to double overnight, the latter may be true, but I firmly believe that a long term rally in the dollar is beneficial. One must recognise that the dollar over several years has lost nearly one half of it's value vs. the Euro from it's peak, and that there is plenty of room to rally back. A move from $1.60 to $1.50 (Euro/Dollar) only makes up for the past few months. Buying at the peak Euro value (April-July) was minimal, so very few would have any incentive to flip what was bought during that time when buyers and appreciation were scarce. I also believe that renewed confidence in the long term will boost foreign investment, and a recognition of the bottom may actually cause a surge in investment, much like when mortgage rates bottom there is a rush to refinance.
In any case it's a healthy and interesting debate.