POLL All roads lead to strong U.S. dollar: FX strategists

U.S. Greenback banknotes are seen on this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

BENGALURU, Sept 7 (Reuters) – The greenback will stay a drive to reckon with over the rest of this yr and into the subsequent as U.S. rates of interest rise and the financial system outperforms its friends, bolstered by its safe-haven enchantment when traders select to fret, in response to a Reuters ballot.

Backed by a robust U.S. financial system nonetheless creating jobs at a consensus-beating tempo, the Federal Reserve has ramped up its combat in opposition to inflation by mountain climbing rates of interest a lot faster than most of its friends. That has helped the greenback flip in certainly one of its greatest performances in a minimum of a decade.

The greenback index which was up round 15% for the yr touched a recent two-decade excessive of 110.55 on Tuesday.

With most outcomes like increased rate of interest differentials and protected haven strikes anticipated to favour the greenback, the foreign money is more likely to stay robust for longer.

“The greenback between now and a minimum of the top of the yr will stay stronger throughout the board,” mentioned Roberto Mialich, foreign money strategist at UniCredit.

“On the present juncture, the Fed, focusing extra on financial progress than inflation would most likely be the one motive why the greenback would possibly change its present pattern… additionally the greenback may additionally profit from its safe-haven standing.”

However past 2022, the greenback was anticipated to surrender a few of these year-to-date good points, the Reuters Sept. 1-6 ballot of 70 overseas trade strategists confirmed.

Nevertheless, these predicted good points for different currencies would fall in need of making up for his or her present year-to-date losses.

Whereas the greenback has dominated almost each foreign money tracked by analysts and merchants it has carried out significantly properly in opposition to the euro , the Japanese yen and the British pound .

All three currencies have both touched multi-decade lows or have been near doing so.

The euro already down 13% for the yr hit a two-decade low of $0.9876 on Monday because the prospects for a winter with out Russian gasoline sunk in. learn extra

It was anticipated to commerce beneath parity over the subsequent three months, suggesting the 75 foundation level European Central Financial institution fee hike forecast for its Thursday assembly would do little to reverse the euro’s fortunes.

The widespread foreign money was forecast to commerce round $1.02 and $1.06 within the subsequent six and 12 months respectively. If realized, these anticipated good points of round 3% to 7% would fall quick in making up for the 13% decline for the yr.

These median forecasts for one, three and 6 month horizons have been the bottom in almost 20 years.

“If the ECB goes with 50 bps, we might be involved markets will see them as not dedicated sufficient to preventing inflation… A 75 bps hike just isn’t frontloading in our view, however a long-overdue catching up from properly behind. The ECB has much more to do,” mentioned Michalis Rousakis, G10 FX strategist at Financial institution of America Securities.

“Nonetheless, this might not be sufficient to assist EUR/USD. Communication will matter far more, in our view. The EUR wants robust statements from (ECB President Christine) Lagarde that the ECB will do no matter it takes to deliver inflation all the way down to the goal.”

The Japanese yen, down a few fifth and the worst underperformer amongst majors for the yr, was anticipated to recoup about half of these losses to commerce at 127.0 per greenback in a yr. It was final buying and selling round 142 in opposition to the greenback.

Britain’s struggling foreign money will not regain its losses in opposition to the U.S. greenback anytime quickly as steep rate of interest will increase from the Financial institution of England fail to offset an anticipated recession and elevated authorities spending.

Sterling, down about 15% this yr, was anticipated to hover on the $1.16 it was buying and selling round on Tuesday in a single and three months time.

In six months the pound may have risen to $1.18 and in a yr to $1.23, the ballot discovered, nonetheless far in need of the round $1.35 it began 2022.

(For different tales from the September Reuters overseas trade ballot:)

Reporting by Hari Kishan; Extra reporting and evaluation by Indradip Ghosh; Polling by Aditi Verma, Milounee Purohit and Susobhan Sarkar; Modifying by Ross Finley and Jonathan Oatis

: .