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By Saqib Iqbal Ahmed
NEW YORK (Reuters) – There are bears of the dollar, then Ulf Lindahl.
The investment director of foreign exchange manager A.G Bisset estimates that the US currency will sink the euro by 36% over the next year, bringing it to levels it had not noticed in more than a decade.
The recent weakness in the dollar “is the beginning of a very significant move” that may hurt the multitude of investors exposed to it through their holdings of US stocks and bonds, Lindahl said.
Wall Street is packed with bearish forecasts for the dollar, although few are as excessive as those of Lindahl.La US currency is nearing its lowest point in 27 months and has fallen by about 11% since its 2020 high compared to a pair basket, with Goldman Sachs, UBS and Societe Generale among the banks forecasting the most losses.
Hedge fund bets against the dollar in the futures markets are at their peak in about a decade, according to knowledge of the Commodity Futures Trading Commission, while 36% of fund managers in a recent Bank of America survey America Global Research called the shorting of the dollar its first money industry for part of the year.
For a speculative position in the index and the CFTC
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Getting the right dollar is for investors, as their trajectory varies from corporate profits to commodity costs such as oil and gold.
Lindahl’s research breaks down the dollar’s fluctuations over the decades into 15-year cycles that show the greenback weakening sharply against the euro before recovering most of the losses.
Although the fall in the dollar has slowed in weeks, it’s “really an opportunity to get out of the dollar,” he said.
Most bearish investors expect the dollar to depreciate due to a more powerful economic expansion, clients outside the United States, US interest rates decline, and fear that systems to mitigate the economy will have a effect on the coronavirus pandemic will inflate budget deficits.
For a chart of 10-year government bond yields between the United States and Germany:
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Goldman Sachs, for example, believes that an ever-improving global economy and genuine negative rates in the United States are a “sustainable recipe for dollar weakness” and expects the euro to be quoted to the industry at $1.30 through 2023, up from $1,196.
TD Securities analysts said the Fed’s new policy against inflation would keep the dollar under pressure, as it suggests interest rates will continue to fall longer.The dollar is overvalued by about 10% compared to other primary currencies, they said.
Robeco, a $174 billion asset manager, believes he will lose floor due to the continued compression of interest rates and expansion spreads, said Jeroen Blokland, portfolio manager of the U.S.-based company.Netherlands.
A falling dollar can have a benign have an effect on on markets as it eases monetary conditions, increases profits for U.S. exporters and facilitates the servint of dollar-denominated debt for countries.
U.S. investors with overseas assets are also less likely to buy hedging against dollar spikes when the currency is expected to remain weak, which may simply increase the profitability of their transactions.
“Right now, my portfolio is covered,” said Lei Wang, portfolio manager at Thornburg Investment Management.”I’m absolutely navigating this other powerful phenomenon of the weakest US dollar.”
At the same time, a prolonged fall in the dollar may send a sign of greater concern, reflecting doubts about U.S. finance and economic growth, as well as a possible weakening of the dollar’s position as the world’s dominant currency.
Nearly some of those who responded to the BofA survey said they expected global U.S. dollar reserves to decline over the next year.
“On those days there are many hypotheses that they will yield and lose their importance as a global reserve currency,” said Michael Gayed, portfolio manager at Toroso Investments/ATAC Rotation Fund.
Others say a reversal of the appetite for threats or more news about the U.S. economy may simply help the dollar.
Rick Rieder, BlackRock’s director of global investments for constant revenue sources, expects the dollar to fall only modestly.Global dependence on the dollar for industry and trade will likely prevent a fall in the US currency, he said.
(Report through Saqib Iqbal Ahmed; edited through Ira Iosebashvili and Paul Simao)