20-Apr (Bloomberg) — When it comes to the dollar’s slump this year, history is repeating itself.
The greenback has fallen 4.2 percent against the euro this year and it’s likely to keep plunging until at least the end of the quarter, according to SEB AB, Sweden’s fourth largest lender. That’s because the U.S. currency tends to weaken during the months soon after the Federal Reserve commences raising interest rates, as the central bank did in December.
“We really don’t see any positive driver for the dollar right now,” Richard Falkenhall, a currency strategist at SEB, said by phone from Stockholm. “t’s really hard to come up with a story where you could expect the dollar to recover.”
Strategists have lowered their outlooks for the currency, while hedge funds all-but abandoned net bullish bets this year after Fed Chair Janet Yellen signaled the central bank would act “cautiously” as it looks to raise rates. That’s capped a 20 percent surge during the past two years on expectations that the Fed would tighten monetary policy in contrast to easing by its biggest counterparts in Japan and Europe.
PG View: It also goes to show that months of headlines touting the demise of gold in the face of tighter policy was all a bunch of hooey!