Analysts Believe Dollar will Remain Unscathed despite Weak Period
According to the results of a latest poll, forex analyst do not believe that the US dollar will suffer in the long-term, despite facing a weak period recently. As a matter of fact, they believe that the world’s reserve currency will come out of this challenge relatively unscathed and continue its dominance because of a number of factors, including the safe-haven status it enjoys. They believe that this would take precedence over any reason people may have to sell. The year has not been a good one for risk assets, something they had dealt with back in 2020 when the COVID-19 pandemic had first struck.
The challenge for risk assets had benefitted the US dollar, as last month’s the currency’s value reached almost two-decade highs. However, the dollar was not able to retake those levels because stocks had seen a small rebound in the previous week and this prompted many to speculate that the trend may have broken. But, others believe that it is still too early to discuss it. Forex strategists said that while people are talking about the stock markets rebounding again and risk assets climbing, but there is a lot of bad news coming through as well.
Therefore, they do not think that a dollar sell-off is going to last long in such an uncertain environment. Majority of the experts are of the opinion that the recent pullback that the greenback has experienced will not last for more than three months. In fact, some believe that it could end as early as the end of this month. Some said that it could take anywhere between three to six months, while there were also those who believe it could take a year. Not only is the US dollar considered a safe haven, but it also offers a way of enjoying the yields from high interest rates.
This has led experts to believe that nothing will be able to dislodge the US dollar from its place of dominance anytime soon. Strategists said that the currency is able to offer yield, safety and growth, which makes it a unique combination. The fact that the Fed still continues to maintain a hawkish stance, as opposed to other central banks like the Bank of Japan, Bank of England and the European Central Bank, further indicates that the dollar will not suffer for long. The Commodity Futures Trading Commission (CFTC) shared positioning data, showing that speculators were going long where the dollar is concerned.
This trend was kicked off almost a year ago and is likely to remain unchanged. According to analysts, the next three months would see traders going long on the US dollar, while they remain short on major currencies, or even emerging currencies. Forecasts indicate that while currencies like the Swiss Franc, British Pound, the Japanese yen and the euro will climb against the dollar in the next year, they are not going to recover the losses they have made in the year. A 4.0% rise in the euro had been expected against the dollar in a year, but it has been moving the opposite way for years.