Mon, Nov 16, 2015 - Page 15 News List

US dollar rally might last for six months: JPMorgan

Bloomberg

The Bloomberg Dollar Spot Index reached the highest level in data going back to 2005 this week on speculation that a strengthening US labor market would pave the way for the central bank to boost borrowing costs at its meeting next month. After liftoff, the pace of rate increases is likely to be gradual, according to several US Federal Reserve (Fed) policymakers who spoke this week.

JPMorgan is among the world’s biggest currency traders, including Deutsche Bank AG and Barclays Plc, that are expecting the US dollar to advance as the Fed tightens monetary policy. The currency’s gains are probably to peak in the middle of next year, said John Normand, head of foreign exchange, commodities and international rates research in London at JPMorgan.

“The bulk of the move is probably going to be in the first three to six months of liftoff,” said Normand, whose bank is the world’s fourth largest currency trader, according to Euromoney magazine.

The US currency ended the week little changed at US$1.0773 per euro in New York. The Bloomberg gauge, which tracks the greenback versus 10 major counterparts, was stable at 1,229.63.

The greenback would strengthen to US$1.06 per euro and ¥125 by the mid-next year, according to the median estimates in Bloomberg surveys of analysts.

The US dollar has risen almost 1.6 percent this month, bolstered by an employment report on Nov. 6 that showed US payrolls surged 271,000, which exceeded all estimates in a Bloomberg survey.

The currency swung between gains and losses for the past eight months as turmoil in the Chinese economy and lackluster US indicators caused traders to question the case for higher rates.

New York Fed President William C. Dudley said the conditions for a rate increase “could soon be satisfied,” in his speech to the Economic Club of New York on Thursday.

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