Turns out, the dollar often weakens during the year after benchmark interest rates start rising.
Americans hoping to take advantage of the greenback’s historic strength with a vacation abroad should consider booking sooner rather than later. After a stunning rally over the past year, the dollar’s stint at multi-decade highs may finally have come to an end.One of them,... Americans hoping to take advantage of the greenback’s historic strength with a vacation abroad should consider booking sooner rather than later.
Record inflation: The highest inflation in four decades has helped spur the Fed to act more aggressively, while also driving up nominal yields . UBS, the Swiss megabank, has officially taken the view that the dollar has reached a secular turning point, and will give back some of its gains in the coming months as the Fed hikes rates.
In making its bearish case for the dollar, the UBS analysts noted that the Fed’s favorite inflation gauge, the personal consumption expenditures index, rose just 0.2% on a month-over-month basis in April, marking the smallest increase since November 2020. This followed a 0.9% month-over-month increase in March.
The team at UBS added that the extent of the dollar’s gains over the past year has been surprising: “While we have guided for short-term USD strength since the start of the year on the back of the Fed’s tightening cycle, the magnitude of the appreciation has exceeded our expectations,” wrote the team, led by Mark Haefele, UBS’s global wealth management chief investment officer.
“We certainly don’t see a case now as the U.S. is driving a much-needed tightening of global financial conditions. But there is a danger that this could go too far and fall too heavily on emerging-market currencies,” wrote Barrow, the head of G-10 strategy, in a note to Standard Bank’s clients.
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