Dollar gains limited in 2016, fund managers look elsewhere
Dec 29, 2015 (LBO) - US Dollar gains are expected to be limited next year compared with the strengthening seen over the last two years after a well-expected tightening of interest rates by the US Fed this month.
The dollar rallied 10 percent to 1.09 per euro this year from 1.2 per euro at the beginning of the year. This is a gain from 1.35 per euro at the beginning of 2014.
The currency will appreciate about 5 percent to 1.05 per euro by the third quarter of 2016 due to the well-expected Fed liftoff, analysts said.
Money managers say they will be looking elsewhere for returns after chasing the U.S. dollar’s gains in the past three years.
The Dollar Index has extended 2014 gains, up near-9 percent against a basket of major world currencies. Some individual currency trades, like USD/Brazil Real, have netted currency investors huge returns, a CNBC report said.
The performance was only beaten by the digital currency bitcoin up 40 percent this year to 428 dollars.
The dollar’s gains are already losing steam in parts of Asia, with the Indonesian rupiah rallying 7.3 percent in the fourth quarter, the Malaysian ringgit 2.5 percent and the Singapore dollar 0.9 percent, according to a Bloomberg report.
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When Quantitative Easing program of feds comes to end it will dry up emerging market capital inflows. Already there are discussions of grave repercussions of US interest rate hike will cause towards countries like India, Turkey, Vietnam, and even to China. High Interest rates in North America will prevent capital outflow to emerging and frontier markets, the reason is the convenience and safety of North American markets combined with High interest rates, guarantees a safe above average returns to investors. So, Sri Lanka do you have any plans to confront this……..
LOL which hole have u been living in all this time. The US QE program ceased on 29th OCTOBER 2014!!!!
SOME PEOPLE
“The Committee judges that there has been a substantial improvement in
the outlook for the labor market since the inception of its current
asset purchase program. Moreover, the Committee continues to see
sufficient underlying strength in the broader economy to support ongoing
progress toward maximum employment in a context of price stability.
Accordingly, the Committee decided to conclude its asset purchase
program this month. The Committee is maintaining its existing policy of
reinvesting principal payments from its holdings of agency debt and
agency mortgage-backed securities in agency mortgage-backed securities
and of rolling over maturing Treasury securities at auction. This
policy, by keeping the Committee’s holdings of longer-term securities at
sizable levels, should help maintain accommodative financial
conditions.”
Still let Feds brain wash you hah! QE program is ongoing as long as low interest rates prevails, QE means buying back government securities + maintaining low interest rates to drive down the cost of money. Feds are cheating and anyone who has any idea about US monetary policy knows about it. Here is the kicker US treasury still issuing debt, and Federal Reserve still printing money to buy back them…..Ever heard about debt ceiling fiasco in the congress, that because QE still going on not that they call it QE but exact same toxic behavior to drive down the cost of money…..
The US Dollar soar.Today is the last date of 2015.(31,12,2015).The actual position as at today is that the USD has surpassed all it’s 16 major peeres ,& is moving way ahead for 2016.Will USD may smash these negetive projections for the third year in a row or other wise?The sky lines are changing fast creating conditions like in a Hadly Chase novel.Winners need to smell the air & feel the grass @ their feet.
Since our last comment the first chapter of the the Hadly Chase novel we are reading has ended sooner than expected. & we are in to the chapter two.Take outs from chapter one are
a)China has lowered the Yuan reference range gradually against the USD.& since yesterday the Yuan reference range is@ a 5year low in comparison with USD..So Youan is @ 5 year low against the USD.Whilst improving competitive posture of China the lower Yuan can pressure EM currencies further.
b)FOMC minutes released yesterday indicates USD will undergo further gradual tightening for now.