Published: 2/19/2018 2:43:00 AM
Kit Juckes, Research Analyst at Societe Generale, explains that the dollar’s moving too fast and a sharp fall might make sense if the US economic or political outlook were in dire straits (to mix my lyricists) but the genesis of this move is an accelerating, synchronized global economic expansion that attracts capital out of dollar assets.
“That justifies a weaker dollar as other currencies out-perform, but the pace has been too frenetic of late. The ILS (held back by political scandal, easy money and low rates) and the PHP (held back by fears about a deteriorating balance of payments) were the only currencies to suffer more than a marginal fall against the US dollar last week. Risk assets in general, and US equity indices most visibly, are recovering.”
“The spike in volatility is reversing and while Treasury yields have come back from their highs, the uptrend is still intact and ‘twin deficits’ concerns are increasingly fashionable. And yet, the dollar’s weakness is showing no signs of losing momentum. An 11% trade-weighted fall in 2017 has been followed by a further 4% in the first 6 weeks of 2018.”
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