This Strategist Still Sees Redemption for Dollar's Doomsayers
(Bloomberg) -- The dollar’s been buoyant this year despite some pretty gloomy projections, but the pessimists are hanging in there. Just ask Steven Englander, Standard Chartered Bank’s global head of currencies.
The Bloomberg Dollar Spot Index briefly traded above 1,200 on Friday, roughly where it ended 2018 and a level it’s kept pushing up toward for months. The gauge has even surpassed its closing price on March 19, the day before the Federal Reserve signaled greater caution about the U.S. economy. Not too shabby for a currency that many still expect to lose momentum.
Englander is among those who see trouble looming. He believes investors are hesitant to sell, but any signals global growth is picking up should spell bad news for the greenback.
“The market really wants to sell dollars, but is afraid to sell dollars right now,” Englander said. Traders are on the lookout for signals that U.S. economic growth is slowing or that China and Europe are picking up, according to the strategist, who says the greenback is likely to “weaken over time as the market waits for that signal.”
That’s not how things have played out so far, though. The Bloomberg dollar index has rallied for four straight quarters, the longest such streak in a decade. Although worries about the U.S. economy recently grew, the rest of the world has had it’s own issues, and that’s supported the dollar.
The greenback was down against all of its Group-of-10 peers on Monday. The Bloomberg dollar index was slightly lower in Monday trading, although still up for the year.
As sentiment about economies outside the U.S. improves, money will shift away from the dollar and American assets won’t look as enticing, Englander said. Central banks have already done this. They held 61.7 percent of their allocated currency reserves in the greenback at the end of December, paring back for a third-straight quarter and shifting to the lowest level since 2013, the International Monetary Fund said in a March 29 report.
“I think for the dollar to really thrive, there has to be some upward surprise in potential growth and projections of where corporate profits are heading over the medium term,” Englander said. “I don’t see where those surprises are coming from.”
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