Dollar index may climb another 25% in 2015: Expert

The dollar has been surging recently against the euro and the yen, and according to Raoul Pal, editor of The Global Macro Investor newsletter, that strength is likely to not only continue, but accelerate.

Pal told CNBC he thinks the dollar index (Intercontinental Exchange US: @DX.2) could climb another 25 percent this year alone.

“If we look back historically at how these big dollar bull markets go, I think it’s going to go, using the (dollar index), at least to 125, maybe even further,” he said Tuesday in an interview with CNBC’s ” Fast Money .”

Pal said the rising dollar, which historically leads to falling oil (Intercontinental Exchange Europe: @WTCL20J-GB) prices, could push the United States into a recession by the end of 2015.

“I’m expecting much more deflation than people are imagining right now … everybody’s going to feel this huge bout of deflation, and that goes through the product cycle,” he said. “There’s a probability that the U.S. goes into recession this year alone.”

Pal said that the stronger dollar, along with weakness in Europe and China, has led oil companies to put crude into storage in hopes of waiting out the downturn in prices. Crude stores are filling “at an incredible rate” and could be full by summer, he said. That could lead to even more dire consequences.

“Any oil that is then brought out of the ground will either have to be sold into the normal market, which will be at much cheaper prices, or they’re going to have to shut down production,” he said. “I think that shutdown of production is something that people haven’t really thought through yet.”

According to Pal, the impact of a large-scale production shutdown could have severe ripple effects across the economy.

“So many of these companies are going to have to shut down production, and the economic damage from that, both in terms of loss of wealth and loss of production, is significant.”

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