Macroscope | With Brexit, Iran tensions and likely global financial instability, the US dollar is far from down and out

While the trade war, political uncertainties in the US and lower interest rates have hit sentiment surrounding the US dollar, risks in Europe and the prospect of higher oil prices could trigger a flight to the US currency

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A clerk scrutinises US$100 notes at KEB Hana Bank in Seoul, South Korea, in February. Investors must decide in the weeks ahead if they are dollar bulls or bears. Photo: EPA-EFE

Published: 2:00pm, 22 Jul 2019Updated: 10:26pm, 22 Jul 2019

Currency investors and traders have some tough decisions to make in the weeks ahead – the most pressing is whether they are intrinsically US dollar bulls or bears. The global economic landscape is changing, monetary policy expectations are up in the air and opinion is becoming extremely divided on the currency’s outlook.

The dollar is the all-important driver of investor risk-perceptions and getting it right will be down to successfully negotiating some tricky upcoming hazards. With the world in the grip of so much uncertainty right now, it is too soon to write off the dollar.

The dollar has had a reasonably good run over the past 18 months, driven by a US Federal Reserve dead set on taking back its past insurance eases, ramping up the dollar’s relative yield appeal against other major currencies in the process. The US economy has been on a high, with investors buying into America’s resurgent growth story, recharged stock markets and Washington’s business-friendly manner, all good news for the dollar. Now this is all up in the air.

Source: Commitments of Traders reports, US Commodity Futures Trading Commission on the Chicago Mercantile Exchange, Refinitiv Datastream

The increasingly bitter US-China trade war, growing political uncertainties at home and the pendulum shift towards lower global interest rates have taken their toll on dollar sentiment. According to US traders’ commitments data in currency futures markets, dollar bulls are reining in their optimism.

The Fed’s whispering campaign for lower rates, global growth concerns and the unsettled political backdrop are making their mark, but investors are picking on the wrong currency.

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.css-1m2rp1p{color:#34b8b5;}Macroscope | With Brexit, Iran tensions and likely global financial instability, the US dollar is far from down and out

Macroscope | With Brexit, Iran tensions and likely global financial instability, the US dollar is far from down and out