A dollar on the defensive brings relief to policymakers globally
Repeats story published on Monday with no changes to text
By Alun John and Karin Strohecker
LONDON, Sept 2 (Reuters) -The dollar fell more than 2% against other major currencies in August, marking its biggest monthly drop this year and providing some relief to economies that have suffered under the weight of dollar strength.
The dollar's downtrend, which has long been anticipated, is driven by expectations that the U.S. Federal Reserve will cut interest rates as the economy weakens.
"The dollar has been under pressure and it will remain under pressure over the remainder of this year," said Guy Miller, chief market strategist, Zurich Insurance Group.
Here's where the relief is being felt the most.
1/ YEN INTERVENTION WATCH, CANCELLED
In July, traders braced for Japanese intervention to prop-up a yen that hit 38-year lows against the dollar, a headache for politicians and the Bank of Japan.
But the yen's dramatic rebound has put an end to such intervention speculation.
One dollar is worth 146 yen, JPY= down more than 15 yen or around 10% from its mid-July levels, thanks to a BOJ rate hike, looming Fed cuts and a sharp reversal of popular carry trades.
"We're not going to get a rebound in U.S. rates like we've had in previous corrections in the past two years. This is a fundamental turn and dollar/yen is heading lower," said Derek Halpenny, MUFG's head of research global markets EMEA.
It's too late for Japanese Prime Minister Fumio Kishida however. He soon steps down, and the weak yen, which drove up prices, contributed to his undoing.
2/ NEVER HAPPY?
Earlier this year, China tried to stop its currency from weakening too much against the dollar, partly in fear this would drive capital outflows. CNY=CFXS
But with the yuan at its strongest since June 2023, authorities now fear further strength could cause disruption.
Its rise is largely due to the dollar weakening - China's domestic economy is fragile - but it could continue, especially if exporters sell the hoard of dollars they have accumulated.
"We generally expect that external developments will continue to outweigh domestic drags, and the yuan should gradually move stronger," said ING chief economist for Greater China Lynn Song, forecasting the dollar at 7 yuan by year-end with a fall of around 1% from current levels.
3/ BREATHING SPACE
The weaker dollar has lifted emerging market currencies elsewhere too, especially in Asia. The Philippine peso PHP= chalked up its best monthly gains in August in some 18-yearsand the Indonesian rupiah IDR= in more than four years.
That momentum did not spread to Latin America, where Mexico's peso MXN= and much of the region suffered hefty losses on domestic woes and wobbly commodity prices.
Nonetheless, a softer dollar coupled with U.S. soft landing hopes provide welcome breathing space for some emerging markets, allowing them more room to cut rates and become more sensitive to domestic growth issues.
"Through the remainder of the year we expect central banks in Philippines, Singapore, South Africa, South Korea, Taiwan and Turkey to join their early-cutter peers in LatAm and (central and Eastern Europe)," said MUFG's head of emerging market research Ehsan Khoman.
4/ FROM FOE TO FRIEND
Two years ago, sterling GBP= fell to record lows, partly on political turmoil, while the euro EUR= hit parity versus the dollar - moves that exacerbated central banks' inflation battle.
That's now changed and currency strength will likely comfort Bank of England and European Central Bank rate-setters looking to ease policy but mindful of sticky inflation in some parts of the economy.
Sterling and the euro are the top performing major currencies this year. Sterling is above $1.30, up over 25% since its record lows and the euro is above $1.10, supported by markets pricing fewer ECB and BoE rate cuts than for the Fed.
5/ CROWNING MOMENT
Sweden's rate-setters are also likely cheering a weaker dollar.
The Swedish crown has rallied 4% in August, making it the best performing major currency SEK=.
It also appreciated versus the euro, EURSEK= helping Sweden to cut rates. Last year Riksbank Governor Eric Thedeen said crown weakness made the inflation fight harder.
It is difficult for Sweden's crown to strengthen further from here, analysts say, but the Norwegian crown could hold up better.
Norway will likely be among the last developed market economies to cut rates, boosting its currency and its sensitivity to global growth.
"In an environment where U.S. interest rates are coming down, U.S. growth slows, but global growth remains stable, high beta (growth sensitive) currencies such as the NOK (Norwegian crown) tend to perform well," NatWest analysts said.
The beleaguered yen has started bouncing back https://reut.rs/3WYLXx2
Emerging Asian currencies outperformed LatAm in August https://reut.rs/3z23FIe
China's yuan is at its strongest on the dollar in over a year https://reut.rs/4dOexsw
The pound and euro have rebounded from their 2022 lows https://reut.rs/3WZ0Yz6
US dollar slumps to 13-month low as Fed signals rate cut US dollar slumps to 13-month low as Fed signals rate cut https://reut.rs/3MmUIw9
The Swedish crown outperformed European peers in August https://reut.rs/3MoTfFN
Reporting by Alun John and Karin Strohecker in London, and the Shanghai newsroom; Editing by Dhara Ranasinghe and Jacqueline Wong
Activos relacionados
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
