Shrutee and Hari Kishan

BENGALURU, Reuters – As long as the Federal Reserve keeps a hawkish policy on interest rate rises and plans to sell some pandemic-related bonds it purchases, the U.S. Dollar will continue to be dominant. This is according to a Reuters poll.

Nearly 7% of the’s gains against major currencies in 2013 have continued and the soared another 4% this year. About half those gains were made just last month.

Federal Reserve officials made some of this strength possible by their comments about Federal Reserve members who, in addition to calling 50-basis rate increases, also openly discussed reducing its $9 trillion balance sheet.

These factors have driven U.S. Treasury yields at multi-year highs, and investors in dollar-denominated investments, a critical part of the strong dollar trading that isn’t expected to slow down anytime soon. This keeps the currency very well-bid.

According to data from the U.S. Commodity Futures Trading Commission, net long positions on the dollar by market speculators rose to an eleven-week high last week.

Over two-thirds (37 of 53) of the analysts that answered separate questions said strong dollar trading would continue for three more months. 17 of them said it would take longer than six months.

13 respondents indicated that they were able to confirm the trade within three months. The remaining three responded with a negative assessment.

Fed officials are expected to increase their tightening efforts this year. The Fed funds rate is expected to reach 3% by the end of the next quarter, although they could even reduce rates in the last quarter of 2023, according to Chris Turner, global head for markets research at ING.

“I believe that the dollar could retain its gains through a lot 2022 and) we shouldn’t begin to expect a weakening of the dollar before perhaps next spring/summer 2023. (Graphic: Reuters foreign exchange poll – April 2022 – https://fingfx.thomsonreuters.com/gfx/polling/znpneqmwxvl/Reuters%20foreign%20exchange%20poll%20-%20April%202022.png)

This view is consistent with the median predictions of more than 80 forex strategists, who predicted that the greenback would eventually give up some of its gains and transfer them to other currencies.

However, there are many causes for delays, including the Russia-Ukraine War, which sent energy prices and commodities spiralling, with Europe feeling the pinch most.

George Saravelos is the global head for FX research. He stated, “We consider developments in the oil market to be the most significant upfront negative.” Deutsche Bank (DE:).

“The downside is that Fed repricing continues to be incrementally less profitable to the dollar. However, the ECB has outperformed our (hawkish), expectations and Europe looks large-scale in its fiscal response to counter the short-term growth impact.

Forecasts for the euro were that it would recover its above 4% loss for the year, and then rise to $1.14 within 12 months. This view has been held by analysts for more than 2 years. Since September 2020 the euro hasn’t gained against USD for three consecutive months.

(For additional stories, see the April Reuters foreign-exchange poll: