BENGALURU, Oct 6 (Reuters) – The unstoppable dollar, which is already enjoying a record year, is likely to extend its dominance beyond 2022, according to a Reuters poll of currency strategists who said the currency was still some distance away. from an inflection point.
Up more than 16% so far in 2022, the dollar index, the currency showing few signs of slowing down anytime soon.
The superior performance of the US economy, the Federal Reserve’s interest rate hike of 300 basis points this year – and more expected – and the role it plays as a safe haven currency have supported the rise of the greenback.
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With these broad narratives supporting the dollar well into next year, the greenback was likely to be well-offered in the short to medium term.
An overwhelming majority of 85% of analysts, 47 out of 55, from September 30 to October 30. 5 A Reuters poll that answered an additional question said that the general strength of the dollar against a basket of currencies has not yet reached an inflection point.
When asked when it would be reached, 25 of the 46 people who responded responded within six months and 17 responded within three months. Of the remaining four analysts, three said within a year and one said more than a year.
“It’s certainly too early to start calling the dollar pivot points…in the short term, we see even more dollar upside,” said Simon Harvey, head of FX analysis at Monex Europe.
“We don’t necessarily see a bigger turn for the greenback until at least the second quarter of next year, when we think we’ll start to see US fundamentals potentially turn against the Fed’s tight policy.”
The prolonged dollar rally is bad news for most major currencies which have not only racked up heavy losses so far this year but also surprisingly underperformed their emerging market peers.
Almost all of the major currencies – eight among the G10 – that were down double digits for the year are unlikely to recoup their year-to-date losses over the next 12 months, according to the survey.
The euro, down 12% over the year against the dollar and which has traded well below parity since August, should remain there for at least another six months.
It is the first time in more than two decades that median forecasts from Reuters polls have called for the common currency to trade below parity over a six-month horizon.
It was then expected to gain about 4% to hit $1.03 in a year, from $0.991 around it on Wednesday.
The Japanese yen, which recently hit a 24-year low at 146/dollar, is expected to recoup some of its losses within a year.
The safe-haven currency is expected to trade around 144.0, 140.5 and 135.0 per dollar over the next three, six and 12 months, respectively.
If that were to happen, it would only represent a gain of around 7% against the dollar in 12 months for a currency already down more than 20% for the year and the worst performer among the majors.
Much of the weakness is due to the Bank of Japan sticking to its ultra-loose monetary policy while nearly all other central banks are moving in the opposite direction.
“The Bank of Japan is still not signaling any changes to its ultra-accommodative monetary policy. A move to less accommodative monetary policy would likely have a larger and longer-lasting effect on the yen exchange rate,” Jimmy Jean noted. , vice-president, chief economist and strategist at Desjardins.
Trading around $1.12 on Wednesday, the latest survey showed the pound to fall to $1.09 in one month and $1.10 in six months. It was expected to be around 3.6% stronger at $1.16 in one year.
(For more stories from the October Reuters Forex Poll:)
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Reporting by Hari Kishan; Additional reporting and analysis by Indradip Ghosh; Poll by Prerana Bhat, Vijayalakshmi Srinivasan and Maneesh Kumar; Editing by Andrea Ricci
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