By Steven C. Johnson
NEW YORK, Dec 7 (Reuters) - The dollar may fall further next year, but tame inflation means its decline is unlikely to accelerate or turn into a crisis, investors said at Monday's opening session of the Reuters Investment Outlook 2010 Summit.
The greenback has lost nearly 7 percent this year against a basket of major currencies, sparking competition concerns among U.S. trading partners and worries from creditors such as China and Japan, which hold some $1.5 trillion in Treasury debt.
The dollar is more than 14 percent off its March peak, and some have worried that additional losses could prompt foreign investors to start selling dollar-denominated assets.
But while a sluggish U.S. recovery and low interest rates mean the dollar may have further to fall in the year ahead, very low inflation means a crisis is far from imminent, said Henry Kaufman, president of Henry Kaufman & Company, Inc.
"There has been no dollar crisis," Kaufman said. "The retreat of the dollar has been gradual, it has been orderly and it is not had an impact on the securities market."
Absent inflation, he said it would take a widening and sustained growth gap between the United States and the rest of the world to ramp up pressure on the dollar, "but that hasn't shown so far."
Mary Miller, head of the fixed income division at Baltimore-based T. Rowe Price, said the firm is bullish on emerging market currencies in Asia and Latin America from economies that were hurt less severely by the credit crisis.
But while opportunities in foreign currencies remain, she also said "we're not hugely negative on the dollar," particularly after an already sharp decline this year.
Both Miller and Kaufman said the weaker greenback was benefiting the U.S. economy by boosting exports.
Martin Sass, founder of M.D. Sass, a New York-based investment advisory company, also said the weaker dollar was helping many S&P 500 companies with significant operations overseas.
In the longer run, he said, large U.S. public debt and deficits are a risk for the dollar, "but I don't think that's a worry for 2010."
An increase in "speculative fervor," which Kaufman said has inflated a commodities bubble, could threaten the dollar as investors borrow the U.S. currency at near zero interest rates and reinvest the money in higher-yielding assets.
As long as the dollar decline remains orderly, though, he said the U.S. government was unlikely to take any action to stabilize the currency for fear that would interrupt a broader recovery.
(For summit blog: http://blogs.reuters.com/summits/) (Editing by Leslie Adler)