BENGALURU (Reuters) – The US dollar, which has dominated foreign exchange markets since early 2018, will continue to be a strength to reckon with at least the rest of this year, according to a majority of currency traders in a Reuters poll.
FILE PHOTO: A package of US dollar bills has been inspected at the Bureau of Engraving and Printing in Washington on March 26, 2015. REUTERS / Gary Cameron // File Photo
Despite being in error for years, strategists are still clinging to their view of a weaker dollar a year.
But analysts since the beginning of the year have repeatedly trimmed how much other major currencies will get in 12 months, reflecting the weakness of non-US economies. They now see the euro climbing 3.5% and Japan's yen about 2% against the dollar in the coming year.
Also, the US economy is showing signs of a slowdown, hampered by the ongoing trade war with China, and is now strengthening the expectations of the Federal Reserve's political easing in the coming months.
Nevertheless, S & P 500 has repeatedly beat record highs and government bonds have fallen to multi-year downs, reflecting the increased interest in dollar-denominated assets, which will give up the currency.
"Where we differ from the rather negative consensus vision, while the Fed delivers these price fluctuations, it still leaves the dollar as one of the highest yields of the G10 currencies, and what we believe consensus misses is the role of direct dividends," says Adam. Cole, head of FX strategy at RBC.
"The fact is that US prices are going to fall. But what sets the dollar up – and has done most of this year – is that even with these surcharges, dividends are still high, and this is a kind of environment where (trade) means. "
While consensus in July 1-4 the survey of over 80 analysts suggests a weaker dollar outlook, three-quarters of respondents to an additional question said greenback's dominance is not over, and they expect it to last at least for the rest of this year.
It includes over 50% of the strategies that predict the dollar's government to continue for more than a year.
But the currency is not likely to maintain the same momentum, robust economic performance, driving the greenback to dizzying heights, has begun falme.
This is reflected in the latest positioning data, which showed that currency speculators cut their bid in favor of the dollar to the lowest since January, according to the US Commodity Futures Trading Commission.
"The dollar rolls over a bit now because markets are pricing more aggressive course strikes, "said Gavin Friend, senior market strategist at NAB.
" But if these additional charges are to be delivered, it is because there have been no resolutions on the global trade situation, and it will not be useful for European growth. "The worsening of trade tensions, the growth of the euro area and inflation have both taken a hit.
To combat it, the president of the European Central Bank, Mario Draghi, called "further stimulus", as many economists predict, comes either in the form of a deeper deposit rate or by linking to the central bank's forward-looking guidance.
The euro EUR was expected to get 3.5% to $ 1.17 a year from about $ 1.13 on Thursday, equivalent to last month's survey, which was the lowest forecast of nearly two years.
But the risk of the already bad euro outlook is more distorted, a majority of strategists said in response to a separate question.
"With each subsequent year and more information we get about how the economy responds – how high can the euro continue to be ratcheted down every time," says James Orlando, senior economist at TD Securities.
"Yes, there is a probability that the euro can appreciate. But it is consistently smaller and smaller than it was the year before. "
But despite the relief expected by both the ECB and the Bank of Japan, not everyone agrees that they will weaken the respective currencies.
Yen JPY =, which is over 1.5% in This is estimated to increase by 2% in one year to trade around 106 yen to the dollar, which was around 107.8 on Thursday.
"Regardless of the ECB swirling around the edges of what they can do with monetary policy – The same way that Japanese has done with theirs – the ECB will not be able to fight the euro / dollar at $ 1.20 anymore than the Bank of Japan can prevent the dollar / yen going down to 100, says Kit Juckes, chief global FX strategist at Societe Generale. .
"Nothing that the ECB does will be as important as what the Fed would do. Nothing that the ECB does will be as important as the amount of pressure – possibly – US President Donald Trump puts on (Fed) to get a weaker dollar . "
Polling Indradip Ghosh and Vivek Mishra; Editing by Ross Finley and Hugh Lawson