Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Dollar still a force to reckon with, at least for this year: Reuters poll

EconomyJul 04, 2019 08:16PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Hari Kishan

BENGALURU (Reuters) - The U.S. dollar, which has dominated currency markets since early 2018, will continue to be a force to reckon with for at least the remainder of this year, according to a majority of currency strategists in a Reuters poll.

Despite being wrong-footed for years, strategists are still clinging on to their view of a weaker dollar in a year.

But analysts since the beginning of the year have repeatedly trimmed how much other major currencies will gain in 12 months, reflecting weakness in economies outside of the United States. They now see the euro climbing 3.5% and Japan's yen about 2% against the dollar in the coming year.

The U.S. economy too is showing signs of a slowdown, hampered by the ongoing trade war with China and now firming expectations for policy easing from the Federal Reserve in coming months.

Still, the S&P 500 has repeatedly hit record highs and Treasury yields have fallen to multi-year lows, reflecting the increased interest in dollar-denominated assets, which should prop up the currency.

"Where we differ from the rather negative consensus view is that even if the Fed delivers those rate cuts, it still leaves the dollar as one of the highest-yielding G10 currencies and what we think the consensus misses is the role of outright yield," said Adam Cole, head of FX strategy at RBC.

"The fact is that U.S. rates are going to be falling. But what is propping the dollar up - and has done for most of this year - is that even with those rate cuts, the yield is still high and this is a kind of environment where carry (trade) matters."

While the consensus in the July 1-4 poll of over 80 analysts suggests a weaker dollar view, three-quarters of respondents to an additional question said the greenback's dominance is not yet over and they expect it to last at least for the remainder of this year.

That includes over 50% of strategists who predict the dollar's reign to continue for more than a year.

But the currency is not likely to maintain the same momentum. Robust economic performance, which fueled the greenback to dizzying heights, has started to fade.

That was reflected in the latest positioning data, which showed currency speculators cut their bets in favor of the dollar to the lowest since January, according to the U.S. Commodity Futures Trading Commission.

"The dollar is rolling over a little bit now because markets are pricing in more aggressive rate cuts," said Gavin Friend, senior market strategist at NAB.

"But if those rate cuts are going to be delivered, it is because there has been no resolution to the global trade situation and that is not going to be helpful to European growth."

Exacerbated by trade tensions, the euro zone growth and inflation outlook have both taken a hit.

To combat that, European Central Bank President Mario Draghi has called for "additional stimulus", which many economists predict will either come in the form of a deeper negative deposit rate or by a tweak to the central bank's forward guidance.

The euro (EUR=) was forecast to gain 3.5% to $1.17 in a year from about $1.13 on Thursday, similar to last month's poll, which was the lowest prediction in almost two years.

But the risk to that already-subdued euro outlook is skewed more to the downside, said a majority of strategists in response to a separate question.

"With every successive year and more information we get about how the economy is responding - how high can the euro go keeps getting ratcheted down every single time," said James Orlando, senior economist at TD Securities.

"Yes, there is a likelihood the euro can appreciate. But it is consistently less and less than it was the previous year."

But despite easing measures widely expected from both the ECB and the Bank of Japan, not everyone agrees that would weaken those respective currencies.

The yen , which is up over 1.5% this year, is forecast to gain around 2% in a year to trade around 106 yen to the dollar. It was around 107.8 on Thursday.

"Irrespective of the ECB fiddling around at the edges of what they can do with monetary policy - in the same way as the Japanese have done with theirs - the ECB won't be able to fight euro/dollar moving to $1.20 anymore than the Bank of Japan can prevent the dollar/yen heading down to a 100," said Kit Juckes, chief global FX strategist at Societe Generale (PA:SOGN).

"Nothing the ECB does will be as important as what the Fed would do. Nothing the ECB does will be as important as how much pressure - possibly - U.S. President Donald Trump puts on (the Fed) to get a weaker dollar."

(Polling by Indradip Ghosh and Vivek Mishra; Editing by Ross Finley and Hugh Lawson)

Dollar still a force to reckon with, at least for this year: Reuters poll
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Tubsy SkinntFinger
TubsSkinnyFinger Jul 04, 2019 8:53PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The chart tells a different story
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email