Hari Kishan

BENGALURU (Reuters – King dollars will be the dominant currency in the short term, before losing ground to its peers in a full year. According to a Reuters poll, FX strategists believe that U.S. Treasury yields will give the greenback most direction for the next twelve months.

In the United States, benchmark yields are rising sharply due to the tapering plan of the U.S. Federal Reserve as well as a chorus of Federal Open Market Committee Members now anticipating that a rate rise by the end next year. This has pushed the dollar to new levels that have not been seen for more than one year.

The U.S. Treasury yields rose by 5% in the past year, according to data. A majority of these gains occurred in the last month. The trend will continue over the next year.

A majority of the analysts (46 of 54) who responded to an additional question stated that U.S. Treasury yields would provide the best direction for the dollar over the next twelve months.

Six analysts said it was incoming economic data and one claimed that its safe-haven status. One analyst stated that developments surrounding the COVID-19 epidemic would drive the market.

According to a separate Reuters Bonds poll, yields on U.S. Treasuries are expected to rise even more from their current level but they would continue rising at a slower pace than the one month ago. [US/INT]

These findings are consistent with the latest Reuters poll that surveyed more than 80 FX strategists. They predicted the dollar would fall marginally against major currencies in the coming 12 months.

Tai Hui (chief Asia market strategist, JP Morgan Asset Management) stated that “the market will focus on the fact U.S. Treasury yields are expected to continue rising on the backside of the Fed’s tapering QE as well as the ongoing recovery of the U.S. Economy.”

“Treasury yields won’t rise indefinitely. They will stabilize at some point and then the dollar will be under a little more downward pressure. That’s why we expect the dollar to weaken.

Reuters poll graphic on major currency market outlook: https://fingfx.thomsonreuters.com/gfx/polling/egvbkyrrqpq/FX%20extra%20questions.png

Latest CFTC data revealed that speculators raised their net long dollars positions to the highest level since March 2020.

Analysts maintained their belief that the euro and major currencies will strengthen against the US dollar in the coming 12 months. This is a view they’ve held on to for many years. However, they predicted weaker gains than they did a month ago.

The last time the currency changed hands was Wednesday at 1.15 on Wednesday. It is expected that it will rise by around 2.3% and trade at $1.18 per year. This was the lowest median forecast since August 2020.

In fact, almost a third of the 76 analysts who forecasted that long into the future believed the euro would weaken.

Reuters poll graphic on the outlook for , , and : https://fingfx.thomsonreuters.com/gfx/polling/dwpkrdxxyvm/Major%20currency%20pairs.png

Jane Foley from Rabobank’s FX Strategy, stated that unless fundamentals shifts are significant, I do not believe a dollar correction would be very widespread.

A near 60% majority (29 of 48) of analysts answered the additional question asking if the greenback is at an inflection stage.

When that time would arrive, most people expect it will be this year. Most of the rest gave an approximate time frame, ranging from early 2022 through end-2024.

“The exaggeration of how the dollars move and what the rates do is probably too much. Steve Englander (OTC) is the head of G10 FX Strategy at Standard Chartered.

(For more stories about the October Reuters foreign currency poll, click here

(Reporting, analysis and polling done by Hari Kishan & Indradip Ghosh. Polling conducted by Prerana Bhat & Saurpya Ganguly. Edited and edited by Ross Finley / Alex Richardson.