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Dollar bears see ‘multi-year downtrend’ ahead for world’s primary reserve currency—with major ripple effects
By Jerry
It just may have been the week that broke the dollar.
The greenback’s worst slump since November has a bevy of strategists and investors saying a turning point is finally at hand for the world’s primary reserve currency. If they’re right, there will be far-reaching consequences for global economies and financial markets.
The US currency is teetering at the lowest level in more than a year after signs of cooling inflation bolstered bets that the Federal Reserve will soon stop hiking interest rates. Dollar bears are looking even further ahead, to what they say are inevitable rate cuts, something the market consensus sees happening at some point in 2024.
“Our call for the dollar to enter a multi-year downtrend is partly based on the fact that the Fed’s tightening cycle will morph into an easing cycle, and this will pull the dollar down even as other central banks cut as well,” Steven Barrow, head of G-10 strategy at Standard Bank, said in a note on Friday.
It’s hard to overstate the potential ripple effects from a long-term greenback slide. It would reduce import prices for developing nations, helping ease their inflation pressures. A greenback reversal also stands to bolster currencies like the yen, which has been tumbling for months, and upend popular trading strategies tied to a weaker yen. More broadly, a softer US currency would tend to boost American firms’ exports at the expense of their counterparts in Europe, Asia and elsewhere.
