The dollar’s three-week rally is just the beginning, according to Deutsche Bank AG.
A slump by the greenback earlier this year has ‘likely run its course,’ analysts at the world’s second-largest currency trader wrote in a note Friday. The bank favors buying the U. S. currency versus emerging markets – such as China, Mexico and South Korea – following a shakeout in speculative bets on the dollar, George Saravelos, co-head of global foreign-exchange research in London, wrote.
With policy makers from the Group-of-Seven economies meeting in Japan, the Federal Reserve this week gave the dollar a boost by signaling that it may raise interest rates as soon as June. That helped send the greenback to a seven-week high, providing relief to policy makers outside the U. S. who have watched with dismay as a weaker dollar eroded the stimulatory effect of interest-rate cuts and bond purchases.
‘The dollar still has some legs,’ said Sebastien Galy, a strategist at Deutsche Bank in New York. ‘The global dollar trend is probably far less appealing than it used to be, but there’s still some opportunity there.’ The Bloomberg Dollar Spot Index, which tracks the dollar versus 10 peers, added 0.8 percent this week. The greenback rose 0.8 percent to $1.1224 per euro and gained 1.4 percent to 110.15 yen.
This post was published at David Stockmans Contra Corner by Bloomberg Business ‘ May 22, 2016.
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