Is it too early for the stock markets to bet on the disappearance of King Dollar?

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It’s too early to undo the dollar’s dominance as the US rate hike cycle may not be near its peak.

That’s the firm belief of fund managers at JPMorgan Asset Management and Fivestar Asset Management, even after the greenback’s gauge hit a one-month low on Thursday. Signs that aggressive tightening by the Federal Reserve is starting to take its toll are fueling bets that the pace of rate hikes will slow.

But dollar bulls remain unfazed: a hawkish Fed, fears of a global recession and heightened geopolitical tensions in Europe should only bolster demand for the US currency, investors say.

“At the moment it’s hard to see what’s causing the dollar to weaken from here,” said Iain Stealey, international investment director for fixed income at JPMorgan. “The Fed hasn’t reached the terminal rate yet, the US economy looks like it’s probably a little bit more resilient than some of the other economies out there.”

Investors are questioning the direction of the dollar after a lower-than-expected rate hike by the Bank of Canada spurred speculation of a dovish pivot by other central banks. A four-month rally in the greenback rippled across the globe as a slew of currencies fell to multi-year lows while import costs in developing countries soared.

The strength of the U.S. currency prompted authorities to intervene, with policymakers from Japan to Chile stepping in to protect their currencies, though the measures yielded limited results.

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The dollar’s winning streak encouraged Ayako Sera of Sumitomo Mitsui Trust Bank Ltd. to assert that the strength of the currency may soon come to an end. “It will take some time to get confirmation that the dollar has topped, but conditions have started to line up for the dollar to top,” she said.

The Bloomberg Dollar Spot Index rose 0.1% on Thursday to head for its first gain in three sessions.

Others are less certain. While the greenback may consolidate ahead of the Fed’s policy meeting next week, “the fundamental backdrop for the dollar remains positive,” wrote Win Thin, head of currency strategy at Brown Brothers Harriman & Co. in New York. in a note.

Fed officials appear divided on the pace of further tightening. Philadelphia Fed President Patrick Harker said authorities are likely to raise interest rates to “well above” 4% this year, while his Chicago counterpart Charles Evans said overspending can be costly “and that there is great uncertainty as to how the restrictive policy should actually turn out”.

Fivestar Asset Management’s Hideo Shimomura is also not ready to stop the greenback’s rally.

“I don’t think we’ve seen the turn for the dollar,” said Shimomura, senior portfolio manager in Tokyo. “That probably won’t happen until we have a clearer picture of how big the Fed will raise rates.”

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