The US dollar will remain dominant as long as the Fed remains hawkish (Reuters poll)

0

U.S. dollar banknotes are seen in this November 7, 2016 illustration. REUTERS/Dado Ruvic/Illustration/File Photo

Join now for FREE unlimited access to Reuters.com

Register

BENGALURU, April 7 (Reuters) – The U.S. dollar will remain dominant for now as long as the Federal Reserve maintains a hawkish course on interest rate hikes and its intentions to offload some of its bond purchases linked to the pandemic, according to a Reuters poll of forex strategists.

The dollar index (.DXY), which gained nearly 7% against major currencies last year, continued its stellar performance and is up another 4% so far this year, with around half of those gains in March alone.

Much of this strength has been prompted by comments from Federal Reserve officials who, in addition to calling for 50 basis point rate hikes, are also openly talking about forcefully shrinking the size of its nearly of $9 trillion. Read more

Join now for FREE unlimited access to Reuters.com

Register

That pushed U.S. Treasury yields to multi-year highs and investors turned to dollar-denominated assets, a key part of strong dollar trading that isn’t expected to fade any time soon, keeping the currency well bid.

Market speculators’ net long bets on the dollar hit an 11-week high last week, according to data from the US Commodity Futures Trading Commission released on Friday.

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

Thirteen respondents said less than three months and the remaining three said the trade was already over.

“We have aggressive tightening coming 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 cut rates by now. the last quarter of 2023,” said Chris Turner, global head of market research at ING.

“I think the dollar could hold onto its gains for much of 2022…(and) we shouldn’t start looking for dollar weakness until perhaps the next spring-summer 2023.”

Reuters Foreign Exchange Survey – April 2022

This view matches the median forecast from the April 4-6 poll of more than 80 forex strategists who expected the greenback to eventually give up some of its gains to other currencies.

But there are many reasons for the delay, not the least of which is the Russian-Ukrainian war, which has caused the cost of energy and raw materials to skyrocket, with Europe in particular feeling the effects. .

“We see the energy market move as the main initial negative for EUR/USD – high prices aren’t going away anytime soon,” noted George Saravelos, global head of FX research at Deutsche. Bank.

“On the other hand, the new Fed price revision is becoming less and less beneficial for the dollar, the ECB has exceeded our (hawkish) expectations and the fiscal response from Europe to offset the impact on growth. in the short term seems important.”

The euro is expected to erase losses of more than 4% for the year and hit $1.14 in 12 months, a view analysts have held for more than two years. The common currency has not gained against the dollar for three consecutive months since September 2020.

(For other articles from the Reuters April Currency Survey: )

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Hari Kishan and Shrutee Sarkar; Poll by Indradip Ghosh and Anant Chandak; Editing by Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

Share.

Comments are closed.