Dollar won't fall as rest of world won't let it: Mike Dolan
The opinions expressed here are those of the author, a columnist for Reuters
By Mike Dolan
LONDON, Oct 9 (Reuters) -The dollar just had its best week in two years, showing once again how dangerous it can be to bet against the U.S. currency if the rest of the world just won't let it drop.
The DXY index .DXY, which tracks the dollar against the most widely traded global currencies, surged more than 2% last week - a stunning whiplash, not least for the many speculators who were short on the greenback and waiting for it to swoon.
While the rally was supercharged partly by the blowout U.S. employment report - and related rethink on the Federal Reserve's interest rate trajectory - the dollar's rebound was well underway before Friday. The payrolls figures merely put the icing on the cake.
The main catalyst for the renewed dollar strength was the clear signals coming from central banks in Europe and Japan that any efforts by the Fed to up the ante on rate cuts would be matched in kind.
The rest of the world's major central bankers certainly took note of the Fed's outsize 50 basis point opening salvo last month in what it flagged as a 250 basis point easing cycle.
The move was followed by a series of pointed comments from chiefs and governors of the European Central Bank, Bank of England and Swiss National Bank. They all suggested their own decks were being cleared for accelerated easing as well.
While the Bank of Japan had been moving in the opposite direction, both the BoJ and the country's new prime minister threw cold water on plans to further 'normalize' policy with higher rates following the Fed's large cut.
Add to that signs that the SNB is already intervening in currency markets to cap the rise of the Swiss franc, ongoing intervention from the Reserve Bank of India, and even a rebound in China's foreign currency reserves, and it's easy to see why the dollar's long-forecast downward path has been frustrated.
'STAGGERING' ACCUMULATION OF US ASSETS
But the really big capital shifts buoying the dollar in less in the public than the private space and reflect the seemingly insatiable appetite of overseas investors for U.S. assets.
Societe Generale's currency strategist Kit Juckes this week puzzled over why the dollar is rising again so shortly after the Fed has started cutting rates. He noted that the two previous multi-year dollar rallies over the past 50 years were completely reversed after Fed easing commenced.
Juckes highlighted data showing that Japanese trust funds have already resumed buying U.S. Treasuries and overseas demand for dollar call options is rising. The quick return to already overcrowded U.S. markets is, in his words, "taking U.S. exceptionalism to new levels."
So the dollar remains stubbornly over-valued: the real, broad trade-weighted index is still some 30% above levels seen 10 years ago. This is creating growing disquiet about the sheer scale of global exposure to U.S. assets, the peculiar twist that has on the dollar exchange rate and its effect on U.S. competitiveness and the reemergence of anxiety about 'global imbalances' that was prevalent 20 years ago.
SocGen strategist Juckes highlighted that foreign investors had increased their net holdings of U.S. assets by a "staggering" $40 trillion since 2020 - making it all the more remarkable that this thirst hasn't yet been slaked.
"I'm certain that a weaker dollar would help reduce some of the imbalances in the global economy, but if investors have so little confidence in their domestic policies and asset markets that they are already returning to the U.S., how does it happen?" he said.
What's more, there's little or no sign that U.S. investors have the remotest interest in underperforming overseas markets.
U.S. mutual fund numbers have seen net outflows from global equities over the last month, a fairly consistent trend since the Fed began raising interest rates in March 2022.
So what could shake investors' unerring faith in the resilience of the U.S. economy, and by extension, the greenback?
Geopolitical concerns are certainly as high as we've seen in many decades. But this, arguably, increases safe haven demand for dollars, encourages U.S. money to hunker down at home and enhances the attraction of unrivalled U.S. scale and liquidity.
Couldthe U.S. election or threats to U.S. democracy and institutions rankle investors?
Certainly a return of Donald Trump to the presidency following the Nov. 5 election may raise concerns, not least given Trump's well-aired support for both a weak dollar and political control of the Fed.
But it's telling given that that even with the White House race on a knife edge, the world still appears determined to keep the dollar aloft.
The opinions expressed here are those of the author, a columnist for Reuters
Dollar speculators were short $ before October's surge https://tmsnrt.rs/4dAQaxw
US-G7 5-year yield spreads and the dollar https://tmsnrt.rs/4gX2Hhl
US investor aversion to overseas equity and the dollar https://tmsnrt.rs/3NfVFXo
US equity outstrips all since pandemic https://tmsnrt.rs/4dGB7SX
SocGen charts on Japanese buying Treasuries and dollar call option demand https://tmsnrt.rs/3BClLBt
US current account gap yawns as the dollar stays aloft https://tmsnrt.rs/3NhoClT
Reporting by Mike Dolan; editing by Jonathan Oatis
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
