Dollar set to maintain strength, low volatility to greet 2020 - Reuters Poll

Reuters 1 week ago

BENGALURU (Reuters) - The U.S. dollar, which has dominated the currency market for the past couple of years, is likely to maintain its position of strength despite diminishing returns from the most overcrowded trade of the year, a Reuters poll of strategists found.

The foreign exchange market will step into a brand new decade with no fresh sense of direction, in part because of little progress by Washington and Beijing in brokering a truce in their prolonged trade spat.

“Fundamentally the dollar will remain strong against a whole basket of currencies because of the need for liquidity and safe haven...the promise of some yield from the U.S. dollar is arguably better than no yield from Germany or the euro,” said Jane Foley, head of FX strategy at Rabobank.

“I think the dollar might slip, but I don’t see it plunging at all next year.”

After months of collective optimism in the markets over a pending reprieve in trade tensions, U.S. President Donald Trump on Tuesday said he was willing to wait until after the next U.S. presidential election in November 2020 to ink a deal with China.

While global equity markets initially reacted sharply to the news, the dollar index, measuring the unit against a basket of six currencies, has barely moved.

Much of the limited reaction is likely down to still-widespread expectations the U.S. will walk back from its planned imposition on Dec. 15 of fresh tariffs on Chinese goods.

“I would suggest it’s more that the markets are basically adjusting to the rhetoric of Trump ... markets will only get upset if the negotiators say we’re stopping again,” said Tim Riddell, macro strategist at Westpac.

“We’ve always felt that the deal, especially ‘Phase Two’ or beyond, was going to be particularly difficult to achieve before the election. So getting a push back like this is not a massive shock to us.”

Yet volatility, which traders thrive on and is currently at low levels for most major currencies, is not expected in the market any time soon. The dollar and the euro have traded in the tightest range in decades this year.

Indeed, a majority of analysts - 38 of 64 - who answered an additional question said current low volatility in most major currencies would last at least another three months. Seven said volatility would return in one month; 19 said it would take up to three months.

The U.S. dollar, which has dominated currency markets and provided a sense of direction over the past couple of years, is also showing some signs of slowing down.

After gaining over 4% last year, the greenback has only eked gains of less than 2% so far in 2019, suggesting much of the trade deal news has already been baked into the currency and any further gains will be hard to come by.

While that is not to say the dollar is bound to weaken, there was no clear consensus among analysts on where the next boost to the world’s top reserve currency was going to come from.

Currency speculators increased their net long dollar positions, taking the total value of bets to $20.11 billion from the previous week’s $18.36 billion, according to the latest Commodity Futures Trading Commission data.

Among the 62 analysts who answered another question in the Reuters poll on what was most likely to dictate the U.S. dollar’s moves from here, 26 said developments in the U.S.-China trade war with a similar number choosing U.S. economic performance.

Seven chose economic performance of other major economies and the remaining three gave varied reasons.

But with no other currency expected to challenge the greenback’s strength, it is expected to stay relatively unscathed in the near future.

The euro, which has lost nearly 4% for the year until now, is expected to recover those losses over the next 12 months.

The common currency is expected to end 2019 at $1.10, a level only a handful of analysts had predicted it would trade at in the January poll. The euro is then forecast to rise to $1.12 and $1.15 in the next six and 12 months.

After a broad decline in 12-month euro forecasts collected in Reuters polls over the last year and a half, they have steadily risen since October’s poll.

“I would say the story is more of the dollar kind of losing some of its attraction rather than the euro becoming much more attractive,” said Lee Hardman, a currency strategist at MUFG in London.

Source link
Read also:
One America News Network › Finance › 1 week ago
By Hari Kishan BENGALURU (Reuters) - The U.S. dollar, which has dominated the currency market for the past couple of years, is likely to maintain its position of strength despite diminishing returns
The Wall Street Journal › 1 month ago
Investment professionals and individual investors have turned to ETFs and mutual funds that buy low-volatility stocks as a way to hedge against market volatility.
Business Insider › Finance › 52 minutes ago
President Trump complained about the US dollar's strength several times in 2019, but eight major currencies are set to outperform the dollar this year. The US dollar index (DXY) is up more than 1% year-to-date, rising despite summer recession fears and...
Business Insider › Finance › 2 months ago
Dollar General and Dollar Tree are two top discount stores. Dollar General sells some items for more than a dollar. It plans to open 975 new stores and remodel 1,000 existing stores. Net sales increased by 8.4% in the second quarter. Dollar Tree's net...
Reuters › Finance › 2 months ago
The price of a popular exchange-traded note that tracks stock market volatility has gotten out of sync with its underlying futures, evoking memories of a volatility surge that accompanied a stock market drop last year and cratered a similarly popular...
Business Insider › Finance › 2 months ago
Dollar Tree is a top dollar store chain. The company's net sales increased in the second quarter by 3.9% and it currently operates over 15,100 stores in the US and Canada under the brands Dollar Tree, Family Dollar, and Dollar Tree Canada. We compared...
Business Insider › Finance › 1 month ago
Dollar stores are gaining ground against Walmart. A report from marketing platform InMarket found that shoppers from low-income groups are more likely to shop at Family Dollar and Dollar General than at Walmart. These results were obtained by measuring...
CNBC › Finance › 3 weeks ago
UBS is predicting a decade of low returns and higher volatility for most financial assets.
The New York Times › Finance › 1 month ago
The dollar's persistent and confounding strength will continue well into next year, and even if a partial U.S.-China trade deal is signed it will at most knock the currency by 1-2% in the immediate aftermath, a Reuters poll found.
Forbes › Finance › 2 weeks ago
Marcus Rashford can go from strength to strength for club and country.
Sign In

Sign in to follow sources and tags you love, and get personalized stories.

Continue with Google