• News
  • Sport
  • TV
  • Radio
  • Education
  • TV Licences
  • Contact Us

For all official information and updates regarding COVID-19, visit the South African Department of Health's website at www.sacoronavirus.co.za

No Result
View All Result
  • SOUTH AFRICA
  • POLITICS
  • BUSINESS
  • SPORT
  • AFRICA
  • WORLD
  • SCI-TECH
  • LIFESTYLE
  • FEATURES
  • OPINION
Home Business

Another year of dollar dominance ahead as the Fed lifts rates: Poll

7 January 2022, 3:08 AM  |
Reuters Reuters |  @SABCNews
Analysts say most currencies will struggle to make any gains against the US dollar in coming months.

Analysts say most currencies will struggle to make any gains against the US dollar in coming months.

Image: Reuters

Analysts say most currencies will struggle to make any gains against the US dollar in coming months.

Most currencies will struggle to make any gains against the US dollar in coming months, as monetary tightening expected from the Federal Reserve will provide the greenback with enough impetus to extend its dominance well into 2022, analysts said.

Nearly two-thirds of 49 foreign exchange strategists polled by Reuters between January 4-6 said interest rate differentials would dictate sentiment in major FX markets in the near term, with only two concerned about new coronavirus variants.

The vast majority of analysts polled said volatility in FX markets would increase over the coming three months, with well above 80% saying so for both majors and EM currencies.

In the meantime the Fed, now expected by traders to raise interest rates in March and begin reducing its asset holdings soon afterward, will provide the dollar with an edge over other major currencies.

Financial markets are now pricing in at least three US rate hikes this year.

“There’s been a lot of US dollar strength of late, mainly driven by the widening interest rate differentials and inflation dynamics in the US relative to other major markets like Japan and Europe,” said Kerry Craig, global market strategist at JP Morgan Asset Management.

“The fact the Fed is becoming much more hawkish and reacting to that by tapering much sooner than forecast a few months ago… (and soon) start raising rates should support the dollar over the first part of the year,” he said.

Median forecasts lined up with that view as analysts do not expect most major and emerging currencies to make any significant headway against the greenback during that period.

While the dollar’s dominance is nearly universal, as in previous Fed tightening cycles, emerging market currencies are likely to feel it the most.

“The macro backdrop looks challenging for emerging market assets,” said Kamakshya Trivedi, co-head of global FX, rates and EM strategy at Goldman Sachs.

“Growth is slowing from peak rates as the reopening boost fades across the world, monetary policy tightening is under way, China has shifted to a lower gear of growth, and some all-too-familiar old-school EM issues like inflation, fiscal overreach and political instability are back on the table.”

Among the emerging currencies polled on, the tightly-controlled Chinese yuan was predicted to depreciate nearly 2% to 6.5 per dollar in a year.

The Philippine peso, Malaysian ringgit and Indian rupee were also expected to weaken about 1% or at best cling to a range.

Turkey’s battered lira was forecast to drop another 14% this year after plunging 44% in 2021, its worst year since President Tayyip Erdogan’s AK Party came to power in 2002 and making it by far the worst performer in emerging markets.

South Africa’s rand, another high-yielder but among the worst-performing emerging market currencies in 2021, is set to remain range bound in the next six months but fall 0.4% to 15.78/$ in a year.

Most major currencies were also not expected to recoup their 2021 losses over the next 12 months.

The euro, which lost nearly 7% last year was forecast to gain a little under 1.5% by end 2022.

Among major safe-haven currencies, the Japanese yen was expected to trade around current levels and the Swiss franc to drop around 3% in a year.

While the general direction of travel seems to be for the dollar to strengthen across the board as there is more clarity on Fed policy, analysts say plenty of risks remain.

“Given the uncertainty around how economies will evolve and how policymakers will respond, we are more confident in our view that currency volatility will be relatively high,” said Jonas Goltermann, senior markets economist at Capital Economics.

Share article
Previous Post

Cruzeiro fans protest against new owner Ronaldo

Next Post

New Mexico, New York police work to get Baldwin phone info

Related Posts

A representation of the virtual cryptocurrency Ethereum is seen among representations of other cryptocurrencies in this picture illustration taken June 14, 2021.

Central African Republic President: Crypto is key to financial inclusion

4 July 2022, 3:47 AM
Labour expert, Mamokgethi Molopyane says there's a possibility that mining companies may cease operations in the next coming years should load shedding continue and this will lead to retrenchments.

Mining companies could cease operations should load shedding persist

3 July 2022, 7:51 PM
A woman looks on next to a parafin light during an electricity load-shedding in Soweto, South Africa, March 2021.

Eskom to implement Stage 6 rolling blackouts from Monday afternoon

3 July 2022, 1:50 PM
A worker pours crude oil into a locally made burner using a funnel at an illegal oil refinery site near river Nun in Nigeria's oil state of Bayelsa.

Nigeria lost $1 billion in Q1 revenue to crude oil theft

3 July 2022, 3:31 AM
Businesses in he Northern Cape say they are battling to stay afloat and are afraid they might soon have to close shop due to lack of power supply.

Northern Cape businesses barely surviving due to load shedding

2 July 2022, 10:47 PM
South African rand notes.

R3.4-billion voluntarily returned by employers who were TERS beneficiaries: UIF

2 July 2022, 10:07 AM
Next Post
Actor Alec Baldwin

New Mexico, New York police work to get Baldwin phone info

Most Viewed

  • 24hrs
  • Week
  • Month
  • EMS says fire at Bree Street Taxi Rank in Johannesburg has been extinguished
  • The public has until 18 May to make submissions on Icasa’s regulations for extension of expiry period for data, airtime
  • ANC NEC expected to hold a special meeting on Sunday
  • Eastern Cape flood victims plead for support as access to food, services remains difficult
  • Amathole Regional Secretary elated to have corruption charges against him dropped
  • Interpol arrests suspect for swindling US citizens millions of dollars
  • Missing Soweto boy’s body found at Eldorado Park wastewater plant
  • Police close investigation into Enyobeni tavern tragedy
  • Taxi commuters to pay an additional R5 in fare from Friday
  • LISTICLE: Enyobeni Tavern saga – What we know
  • Interpol arrests suspect for swindling US citizens millions of dollars
  • East London police search for clues that led to tavern death; calls to revoke tavern’s licence 
  • UPDATE: At least 17 people killed in an East London tavern stampede
  • SANTACO and NTA calls on COSATU to join the national shutdown over the hiking fuel prices
  • NTA yet to decide whether to support calls for national shutdown amid fuel price hikes

LATEST

V, Suga, Jin, Jungkook, RM, Jimin and J-Hope of BTS arrive at the 2021 American Music Awards at the Microsoft Theater in Los Angeles.
  • Lifestyle

BTS rekindle debate about military service in South Korea


  • Coronavirus
  • Sci-tech

CORONAVIRUS: Your daily update


Football player playing with the ball.
  • Sport
  • Soccer

African Cup of Nations finals moved to January 2024


Spain's Rafael Nadal in action during his third round match against Italy's Lorenzo Sonego.
  • Sport

Nadal steps over the mark as he gives Sonego a dressing down


Ukrainian servicemen walk near a destroyed bridge as Russia's invasion of Ukraine continues.
  • World

Ukraine withdraws from battered Lysychansk city; Russia claims major victory


A general view of a burning warehouse during violence and looting in Durban, July 14, 2021.
  • South Africa

SA marks first anniversary of the July unrest


Weather

  • About the SABC
  • Contact Us
  • Jobs
  • Advertise
  • Disclaimer
  • Site Map

SABC © 2022

No Result
View All Result
  • SOUTH AFRICA
  • POLITICS
  • BUSINESS
  • SPORT
  • AFRICA
  • WORLD
  • SCI-TECH
  • LIFESTYLE
  • FEATURES
  • OPINION

© 2022

Previous Cruzeiro fans protest against new owner Ronaldo
Next New Mexico, New York police work to get Baldwin phone info