Some Strategists Predict Dollar's Rebound

The rapid decline of the dollar may turn out to be so 2006 and 2007, according to some experts. Investors and fund strategists who diversified away from the greenback and into foreign investments were well-rewarded during this period.

However, it may be time to ease back into holdings that will profit from the comeback of the dollar.

Many experts say the dollar has probably hit rock bottom, and will only go up from here.

No one is saying that portfolios should be entirely rebalanced; diversification is still a worthy goal. But those who overweighed foreign stocks in the past two years may need to rebalance, according to various news reports.

For some, the strengthening of the dollar will be the big story in 2008. If this occurs, it will behoove investors and fund managers to underweight stocks in the Euro zone and Britain , while putting more assets to work in emerging market countries.

But there is debate about how the return of the dollar will play out in developing economies. After their torrid increases last year, China and India have emerged as question marks among some strategists because of doubts about how much upside is left in these economies.

However, if the emerging market has oil production capacities, it should be less challenged in achieving growth. Large-cap foreign stocks in countries like Brazil and Venezuela should be good bets.