Bangalore (Reuters) – Most currency strategists surveyed by Reuters said that the dollar’s strength hasn’t reached its peak yet. However, opinions were mixed on when the dollar’s rise would end.
In mid-July, the greenback fell from a 10-year high, but it quickly bounced back when three Fed officials said the central bank was “completely united” on raising rates to a level that would slow the highest U.S. inflation since the 1980s.
Since the global economy is expected to slow down significantly and the Fed is expected to stay ahead of its peers in the tightening cycle, it will be hard for the dollar to weaken significantly or for most other currencies to make a comeback.
In the poll from August 1-3, more than 70% of the strategists who answered an extra question, or 40 out of 56, said the dollar’s strength hasn’t reached its peak yet.
When asked when it would reach its peak, 14 people said within three months, 19 within six months, six within a year, and one within two years. Only 16 said it already
“For the USD to get weaker, the Fed has to care more about growth than inflation,” said Michalis Rousakis, a G10 FX strategist at Bank of America (NYSE:BAC) Securities. “We are not there yet,” he said.
Reuters Poll: U.S. dollar outlook-https://fx.thomsonreuters.com/gfx/polling/klvykwkzzvg/Reuters%20Poll%20%20%20%20%20%20%20%20%20%20%20%20%20%20%20%20%20% 20%20%20%
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Already up about 11% in 2022, the dollar is expected to lose some of its gains over the next year. But few of the major currencies were expected to make up for all of the losses they had made so far this year.
“In the long run, say two, three, or four years from now, the dollar is likely to be much weaker. But in a year’s time, we’re looking at pretty small changes, “Brian Rose, who is a senior economist at UBS Global Wealth Management, said this.
determining outlook
Last month, the euro reached the same value as the dollar, which was the lowest level in almost 20 years. The euro is down more than 10% in 2022. It was expected to go up more than 6% from where it is now by July of next year. In the next three, six, and 12 months, it was expected to be worth $1.02, $1.05, and $1.08, respectively.
These median predictions, which were the lowest in a Reuters FX poll since 2017, showed that the common currency’s future was getting worse.
In a July poll, only a small number of analysts thought the euro would trade at or below parity against the dollar in the next few years. Currently, roughly one-third of the more than 60 strategists believe it will trade at or below parity in the next three months.
“We want the dollar to stay strong in the short term, especially compared to the euro. So we think it’s possible that the euro will fall below parity, “Rose said.
Even though the safe-haven Japanese yen rose recently when U.S. Treasury yields fell, it is still down about 14% for the year, making it the biggest loser among its major peers.
In a year, the carry trade currency was expected to gain about 5% and trade at around 127 per dollar, making up some of the losses.
“I think the most important question about the dollar is, if you sell the dollar, what do you buy?” said Jane Foley, head of FX strategy at Rabobank. “You’re not going to buy a lot of yen compared to the U.S. dollar when you can get a much higher yield in dollars.”
The higher yields that dollar assets have are also likely to hurt currencies in emerging markets, making things worse for a group that was already in bad shape.
The Chinese yuan and the Korean won were expected to stay in the same range for the next three to six months. However, the Indian rupee, the South African rand, the Russian rouble, and the Turkish lira were all expected to fall.
Phoenix Kalen, who is in charge of emerging markets research at Societe Generale (OTC:SCGLY), listed a lot of things that could go wrong with these currencies.
“For EM FX, we are less encouraged by the pullback in the market’s pricing of FOMC rate hikes and more focused on the underlying context of weakening global growth, tightening financial conditions, worsening geopolitics, continuing EM portfolio outflows, still-high inflation, and the possibility of negative China surprises,” Kalen said.
(For more news from the Reuters foreign exchange poll in August, see:)
