Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

U.S. dollar to stay dominant so long as Fed stays hawkish: Reuters poll

Economy Apr 06, 2022 08:20PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

By Hari Kishan and Shrutee Sarkar

BENGALURU (Reuters) - The U.S. dollar will remain dominant for now so long as the Federal Reserve stays a hawkish course on interest rate hikes and its intentions to unload some of its pandemic-related bond purchases, according to a Reuters poll of forex strategists.

The dollar index, which gained nearly 7% against major currencies last year, continued its stellar performance and has risen another 4% so far this year, with about half of those gains in March alone.

Much of that strength was driven by comments from Federal Reserve officials who in addition to calling for 50-basis point rate rises are also speaking openly about forcefully reducing the size of its nearly $9 trillion balance sheet.

That has driven U.S. Treasury yields to multi-year highs and investors into dollar-denominated assets, a key part of the strong dollar trade that is not expected to fade any time soon, keeping the currency well-bid.

Market speculators' net long bets on the dollar rose to an 11-week high in the latest week, according to U.S. Commodity Futures Trading Commission data released on Friday.

More than two-thirds of analysts who answered a separate question, 37 of 53, said the strong dollar trade would last for at least another three months, including 17 who said more than six months.

Thirteen respondents said under three months and the remaining three said the trade is already over.

"We've got some aggressive tightening coming up this year from the Fed. We think the fed funds rate will probably hit 3% in the first quarter of next year, but (they could) even be cutting rates by the final quarter of 2023," said Chris Turner, global head of markets research at ING.

"I think the dollar could hold onto its gains for a lot of 2022...(and) we shouldn't be starting to look for weakening in the dollar until perhaps, next spring-summer 2023." (Graphic: Reuters foreign exchange poll - April 2022 - https://fingfx.thomsonreuters.com/gfx/polling/znpneqmwxvl/Reuters%20foreign%20exchange%20poll%20-%20April%202022.png)

That view lines up with median forecasts in the April 4-6 poll of over 80 forex strategists who expected the greenback to eventually cede some of its gains to other currencies.

But there are plenty of reasons for delay, not least of which is the Russia-Ukraine war, which has sent the cost of energy and commodities spiralling higher, with Europe in particular feeling the pinch.

"We see developments in the energy market as the most important upfront negative for EUR/USD - elevated prices are not going away any time soon," noted George Saravelos, global head of FX research at Deutsche Bank (DE:DBKGn).

"On the flipside, further Fed repricing is becoming incrementally less beneficial to the dollar, the ECB has exceeded our (hawkish) expectations and Europe's fiscal response to offset the near-term growth impact looks sizeable."

The euro was forecast to erase its over 4% losses for the year and rise to $1.14 in 12 months, a view analysts have held onto for more than two years. The common currency has not gained against the dollar for three months in a row since September 2020.

(For other stories from the April Reuters foreign exchange poll:)

U.S. dollar to stay dominant so long as Fed stays hawkish: 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.
 
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
Continue with Google
or
Sign up with Email