The US dollar is plunging so far, so fast, its shockwaves are reverberating far beyond the US$5.3 trillion-a-day foreign exchange market.
The greenback plunged the most this week since 2008 versus the yen after economic reports trailed forecasts, dampening the outlook for growth as US Federal Reserve policymakers await evidence needed to justify more interest-rate increases.
The US currency has eroded more than half its 9 percent surge last year, with one measure of US dollar momentum approaching a level that indicates to some analysts that it is oversold and set to reverse direction.
The US dollar’s dive has hurt investors in international stocks, boosted the price of US dollar-denominated commodities and higher-yielding assets in emerging markets, and complicated the task of central banks around the world that need weaker currencies to boost their economies.
Investors are increasingly unconvinced that growth in the US can make up for a slump elsewhere. A slate of reports scheduled for release next week, including a monthly payrolls release, may add to their qualms.
“Any time that you’ve got a major reserve currency like the dollar falling, you tend to get a bid to other stores of value,” said William Northey, who helps oversee US$125 billion as chief investment officer in Helena, Montana for US Bank’s private client group. “From a broader capital markets perspective, there’s a couple of real benefits to the cessation of the dollar strength.”
The US currency tumbled 4.7 percent this week to ￥106.50, the largest drop since October 2008. It lost 2 percent to US$1.1451 per euro.
The Bloomberg’s Dollar Spot Index slumped 2 percent, the most in more than a year, after touching its lowest level since May last year.
Hedge funds and other large speculators extended bets on US dollar weakness after turning net bearish on the currency versus eight peers for the first time since 2014 last week.
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