Dollar outlook remains dark, recent strength a bump: Reuters poll By Reuters

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© Reuters. FILE PHOTO: This image shows US dollar and euro bills

By Hari Kishan BENGALURU (Reuters) – The dollar’s weakening trend is still in play, and the currency is expected to remain in range or fall in the next three months, according to most strategists in a Reuters poll, which which suggests the recent strength of the currency. it was just a problem. After a sell-off that began last year, the dollar has risen in four of the past five weeks and is up more than 1% for the year as traders revised the heavy bets against the currency. But all of the factors underpinning the dollar’s strength were expected to be transitory, according to the Feb.1-4 survey of more than 70 analysts. They kept their weak dollar predictions for the next year largely unchanged from the January survey. More than 85%, or 63 of the 73 analysts who responded to an additional question, expected the dollar to remain at current levels or fall over the next three months. Only 10 expected it to rise from here. “There are many more downsides to the dollar, and our long-term outlook is for the weaker dollar, not the strong dollar,” said Steve Englander, head of G10 global currency research and North America macro strategy at Standard Chartered. (OTC :). “The expectations with which investors arrived at the beginning of the year have been derailed a bit, but in this case we think temporarily.” Reuters Poll: US Dollar Outlook https://fingfx.thomsonreuters.com/gfx/polling/nmopaoewkpa/Reuters%20Poll%20-%20US%20dollar%20outlook.png Reflecting that outlook, the latest positioning data showed that Currency speculators were still betting against the dollar, despite cutting some of their dollar shorts last week from the highest in nearly 10 years the previous week. When asked about the dollar’s positioning for the end of February, just over half, or 29 out of 55 analysts, said that bets against the currency would remain at current levels or increase. Twenty-four predicted a decrease in shorts. Only two expected a reversal of net long positions. “Current net short positions are around extreme levels, which makes it more difficult to increase from here. But we also see little reason to expect a strong reversal in the coming weeks,” said David Alexander Meier, economist at Julius Baer. Despite a continued rally in risk assets, the dollar, which generally moves in the opposite direction to stocks, has strengthened as investors turned their attention to a widening gap between the strength of rallies pandemics in the US and Europe and the launch of vaccines. (For a Reuters chart comparing the annual performance of the US dollar and the: https://fingfx.thomsonreuters.com/gfx/polling/xlbpgykjypq/DXY.PNG) The world’s largest economy was forecast to lead in both respects , with the Eurozone weeks behind the US in immunizing its population. Still, the euro, which has lost more than 1.5% over the year and was trading near a nine-week lows against the dollar on Thursday, was forecast to pick up all of those losses and rise more than 4.0% in the coming years. 12 months. The euro was expected to strengthen to $ 1.23 in six months and $ 1.25 in one year. On Thursday it changed hands around $ 1.20. That is largely attributed to the Fed’s concerns about the pace of the recovery, putting even more weight behind its promise to keep monetary policy in an “accommodative” stance for what may be months or even years to come. “The euro / dollar didn’t hit $ 1.24 because Europe was suddenly wonderful. The euro hit $ 1.24 thanks to the Fed,” said Kit Juckes, head of foreign exchange strategy at Societe Generale (OTC :). “About 90% of this (the movement of the euro) is the American side of the equation, and that has not changed. What has changed is that we get into this too quickly and that is correcting.” And it’s not just against major currencies – the dollar was also forecast to weaken against emerging market currencies in the coming year. [EMRG/POLL] “Much of the exceptionalism of the dollar has to do with its scarcity. The perspective now is that there will be no shortage of dollars and, in fact, there will be abundance as far as the eye can see,” said Englander of Standard Chartered. “The Fed will be forced to do this (by providing dollar liquidity), because they know what will happen if they raise long-term interest rates or allow long-term rates to rise again.” (For other stories from the February Reuters currency poll 🙂