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“Dollar to stay strong this year, weaken next, Reuters analyst poll shows”

BANGALORE, Sept 7 (Reuters) – The dollar’s strength will be an insurmountable hurdle for most major currencies by the end of the year, according to a Reuters survey of foreign exchange strategists.

The dollar has remained resilient against most major currencies despite periods of weakness, supported by a strong economy and rising U.S. Treasury yields, the highest among developed economies.

The safe-haven dollar touched a six-month high as concerns about China and global growth dampened risk appetite and expectations that the U.S. Federal Reserve would keep interest rates higher for longer, but then recovered almost all of its mid-year losses and is now up more than 1 percent for the year.

This strong performance has prompted a re-examination of the long-held view that the dollar is weakening in the short to medium term.

A Reuters poll from Sept. 1-6 showed that 43 of 53 analysts who answered additional questions said the dollar’s outlook faces upside risks, a whopping 81 percent.

“We think the dollar will continue to strengthen and will continue to do so over the next three months,” said Jane Foley, head of foreign exchange strategy at Rabobank.

“Dollar to stay strong this year, weaken next, Reuters analyst poll shows”

But according to the median opinion of about 70 FX strategists, the dollar is expected to weaken modestly against most major currencies over the course of the year, with most of that coming next year as the Federal Reserve’s first interest-rate cut nears.

“Over the next six to nine months, we expect the Fed to start cutting rates, at which point we think the dollar will weaken again.

The euro, which has failed to make any significant progress amid a deteriorating growth outlook, is up just 0.13% this year and is expected to rise 1.7% to $1.09 in three months, essentially unchanged from the August survey.

It is forecast to rise 2.7% and 4.6% to $1.10 and $1.12 in six and 12 months respectively.

The Japanese Yen has depreciated more than 11% against the US Dollar this year, trading at $147/Yen on Wednesday, and is expected to recover all of this year’s losses to $132/Yen over the next 12 months.

The British pound has already gained nearly 3.5% in 2023 and is expected to rise another 3% to $1.29 a year from now.

Elsewhere, other Asian currencies will face significant friction in regaining lost ground in a year, according to the poll. Almost all Asian currencies are expected to remain within range or rise slightly against the dollar in the coming months.

In Latin America, the Brazilian real and the Mexican peso, which have risen about 6% and 12%, respectively, against the dollar, are expected to fall only slightly by the end of the year.

However, the Argentine peso, which is down 50% this year, could depreciate sharply again, falling another 17% by the end of November, the survey found.


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