{"id":1640978,"date":"2022-09-14T12:50:41","date_gmt":"2022-09-14T16:50:41","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1640978"},"modified":"2022-09-14T12:50:57","modified_gmt":"2022-09-14T16:50:57","slug":"analysis-why-the-dollars-wrecking-ball-rally-is-not-done-yet","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/analysis-why-the-dollars-wrecking-ball-rally-is-not-done-yet\/","title":{"rendered":"Analysis-Why the dollar\u2019s wrecking-ball rally is not done yet"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">18<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fanalysis-why-the-dollars-wrecking-ball-rally-is-not-done-yet%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1640978&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>By Tom Westbrook<\/p>\n<p>SINGAPORE (Reuters) \u2013     A rally that has the dollar on course for its best year since 1984 has further to run, traders and analysts say, suggesting more pain almost everywhere else as other currencies either crumble or require rapid rate hikes to stay put.<\/p>\n<p>The rise \u2013 the dollar is up nearly 15% against a basket of currencies this year \u2013 has already been a wrecking ball through foreign exchange markets, crushing the euro and yen to two-decade lows and sterling to its lowest in nearly 40 years.<\/p>\n<p>Tuesday\u2019s surprisingly hot U.S. inflation data led the latest surge as investors price in larger and faster U.S. rate rises in response and are even speculating the Federal Reserve could hike by a full percentage point next week.<\/p>\n<p>That sort of outlook, and the backing for the dollar in  markets, is a direct challenge to global central banks, who face a choice between watching their local currencies weaken, or slowing the process by either selling dollars or raising rates, risking a sharp slowdown in economic growth.    <\/p>\n<p>\u201cI don\u2019t think there is anything that can stop the dollar,\u201d said Rabobank strategist Michael Every, as long as U.S. rates are rising.<\/p>\n<p>\u201cThere will be intermittent phases where the market might try to delude itself and pretend what is happening isn\u2019t happening,\u201d he said. \u201c(But) we see the dollar significantly stronger by year-end.\u201d<\/p>\n<p>The U.S. dollar index, which measures the greenback against a basket of six major currencies, was at 109.60 on Wednesday, barely below early September\u2019s 20-year peak at 110.79. Its year-to-date gain is just shy of 1984\u2019s 14.9% full-year rise.<\/p>\n<p>Gains against individual majors have been immense, with the dollar up about 14% on the euro this year, 17% on sterling and nearly 25% on the yen.<\/p>\n<p>Interest rates have been a major driver, as higher rates give dollar bonds and deposits attractive yields.<\/p>\n<p>Outside the United States, major economies\u2019 rates trajectories have seemed less aggressive, or stand in stark contrast.<\/p>\n<p>The European Central Bank only last week turned to talk of \u201cfront-loading\u201d hikes. China is cutting rates, while Japan is steadfastly holding them at zero. Analysts say safety and the relative robustness of the U.S. economy provide extra tailwinds.    <\/p>\n<p>\u201cTo see the dollar weaken from here we would need to see some of these factors reverse,\u201d said Alex Wolf, Asia head of investment strategy at J.P. Morgan Private Bank.<\/p>\n<p>\u201cWe believe the dollar may continue to see near-term upside and that strength is likely to persist and we continue to encourage clients to hedge their non-dollar exposures.    <\/p>\n<p>DIVERGENCE<\/p>\n<p>The dollar\u2019s long rise is growing uncomfortable for trading partners because increasing dollar-priced import costs come as the world grapples with runaway inflation.<\/p>\n<p>The most discomfort is apparent in Asia where commodity importing countries such as South Korea and India have faced heavy selling pressure on their currencies and economic worries have China struggling to contain a slide in the yuan.<\/p>\n<p>The biggest loser, however, has been the Japanese yen. The Bank of Japan\u2019s refusal to budge on a policy of forcing bond yields to stay near zero, while U.S. rates rise sharply, has left the yen as the prime corollary of dollar strength.<\/p>\n<p>\u201cYou have these two very, very firm central banks. One is moving higher and the other is flatlining,\u201d said Bart Wakabayashi, branch manager at State Street in Tokyo.<\/p>\n<p>\u201cWhat is the effect? The currencies will diverge. Until there\u2019s a change in that \u2014 either the Fed starts to come down or the BOJ starts to come up, this should continue,\u201d he said, with a yen slide to 147 per dollar a possibility.<\/p>\n<p>The yen pulled away from a 24-year trough on Wednesday after reports that the Bank of Japan conducted a rate check, in apparent preparation for rare currency intervention, though markets believed the respite likely won\u2019t last long.<\/p>\n<p>To be sure, the dollar\u2019s rally will surely end eventually and not everyone is betting it has much further to rise.<\/p>\n<p>Positioning data shows the market is long dollars but not remarkably so by historical standards, and economists say the point of raising U.S. rates, which is to slow the economy, is ultimately a dollar negative.<\/p>\n<p>\u201cThe Fed has to slow the U.S. economy if it wants to get inflation down. All they have done is remove accommodation. They haven\u2019t moved to a restrictive policy,\u201d said ING\u2019s Asia-Pacific head of research, Rob Carnell.<\/p>\n<p>But with timing and nature of the dollar\u2019s eventual retreat so unclear, most are getting out of its way.<\/p>\n<p>\u201cWe are seeing large bids in the dollar right now,\u201d said Shafali Sachdev head of FX, fixed income and commodities for Asia at BNP Paribas Wealth Management in Singapore.<\/p>\n<p>\u201cIt continues to be supportive for the dollar in the short term because the market is in the process of re-pricing expectations of the Fed\u2019s policy path, and the expectation of a pivot by the Fed on rates gets moved further down.\u201d<\/p>\n<p> (Reporting by Tom Westbrook; Additional reporting by Vidya Ranganathan; Editing by Kim Coghill)<\/p>\n<p><a href=\"https:\/\/www.oann.com\/?attachment_id=2748627\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/09\/tagreuters.com2022binary_LYNXMPEI8D0CL-VIEWIMAGE.jpg\" alt=\"tagreuters.com2022binary_LYNXMPEI8D0CL-VIEWIMAGE\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Tom Westbrook SINGAPORE (Reuters) \u2013 A rally that has the dollar on course for its best year since 1984 has further to run, traders and analysts say, suggesting more<\/p>\n","protected":false},"author":66,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1640978","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1640978","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/66"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1640978"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1640978\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1640978"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1640978"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1640978"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}