The dollar doomed to decline for lack of support

by Hari Kishan and Rahul Karunakar

BANGALORE (Reuters) – The cycle of rise in the dollar is nearing its end, think about two-thirds of managers of strategies exchange polled by Reuters, to which the recent downward revision of interest rate expectations, has reduced the comparative advantage of the greenback.

If she has recorded for the whole of last year, its best performance since 2015, the u.s. currency has depreciated in recent weeks, the federal Reserve hinted that it could slow down the pace of raising its interest rate.

The dollar has hit on Wednesday, its lowest level since October in the face of a basket of reference currencies.

The survey, conducted between 2 and 9 January, with more than 70 specialists of the currency market shows that the dollar could erase this year the major part of the gains of over 4% gained in 2018 in the face of other major currencies, on the background of the slowdown of the economic growth in the United States.

“Basically, the dollar is short of elements that can make it up. The Fed has told us that it was close probably the time it will pause in the rise in interest rates and we expect that the momentum that has benefited the u.s. growth last year dissipates permanently,” says Erik Nelson, a strategist currencies of Wells Fargo (NYSE:WFC).

“These two factors that have been really beneficial last year are disappearing. I thus do not see this who will play the role of engine cyclic for the dollar.”

Thirty-nine of the 62 analysts who responded to a specific question on the topic believed that the period of dominance of the dollar on the currency market observed since the beginning of last year had ended, and among the rest, an overwhelming majority expect to be completed in six months at the most.

Only three of them have said that the rise in the dollar could continue for a year or more.

So far, the medians of the responses to the survey show that the other major currencies could best erase their losses of 2018 against the dollar this year.

Indeed, with the expected slowdown in the growth of the main economies of the world and the attitude still accommodative of the major central banks, a sharp decline in the dollar or a significant increase in other major currencies is considered to be unlikely.

THE POUND STERLING REMAINS DEPENDENT ON THE TERMS OF THE BREXIT

The euro, which has lost more than 4% last year, should return about 5% in 2019, to go back to 1.20 the dollar in a year compared to around 1,1450 Wednesday.

The economic outlook is bleak the euro area will limit the potential rebound of the single currency.

“I recognize that the fundamentals of the dollar have deteriorated, but I believe that those of the euro are also degraded,” said Jane Foley, a strategist senior Rabobank. “I don’t see any large trend in favour of one or the other dominate strongly this year.”

The evolution of the pound sterling, it will depend on the conditions in which the Uk will exit the european Union. The british currency is expected to 1.38 dollar in a year compared to about 1.27 on Wednesday, is up about 9%.

The yen, after having benefited from the degradation of the safe-haven status of the dollar because of trade tensions between the United States and China, should finish the year without a big change compared to its current level.

But after rising more than 3% in a few weeks, it would suffer its fourth consecutive year of appreciation against the dollar.

“Even though we may be tempted to ignore the ‘flash crash’ in the markets or to classify them among the technical problems, it is speaking of a declaration that the dollar/yen was eventually stabilise more than 1% below its level before the crash,” note the analysts of Goldman Sachs (NYSE:GS).

“With the wrong signals of the manufacturing surveys for the u.s., the volatility of equity markets and less increases to the Fed, all the engines of the yen are synchronized.”

(Marc Angrand for French service, edited by Blandine Hénault)