There is limited room for the US dollar to rise further, as currency markets have mostly priced in US economic growth and interest rate hikes by the US Federal Reserve, the local branch of Standard Chartered Bank said yesterday.
The Asia-focused British bank expects the global economy to expand 4 percent this year, faster than last year’s 3.8 percent, as evidenced by economic data improvement around the world.
The US dollar might remain strong in the short term, with the Fed poised for two more rate hikes this year, while trade tensions between the US and China gain steam, Standard Chartered Bank Taiwan’s (渣打台灣銀行) wealth management head Cindy Fu (傅敏儀) said.
“For the medium and long run, the US dollar may come under correction pressure, as the markets have priced in the US economic showing and Fed’s moves,” Fu said.
The bank expects the US Dollar Index, a measure of the value of the greenback against six major currencies, might face resistance at the 96 to 98 range, from about 94 now, Fu said.
The EU and the UK would enter monetary tightening cycles, subduing the yield gap of the US currency versus the euro or the British pound, she said.
The euro might find support at 1.15 against the greenback and challenge 1.2 in the second half of the year, following the EU announcement to stop the bond purchase program this year.
Against the global backdrop, Standard Chartered Bank favors equities over bonds, based on the belief that a full-blown trade war is unlikely, though tensions are building, Fu said.
The yuan is likely to range-trade between 6.5 and 6.7 against the US dollar for the rest of this year, if the trade rows stabilize, Fu said.
Otherwise, the Chinese currency could weaken to 6.9 and signs of stabilization could be delayed until after the midterm elections in the US, she said, adding that risk diversification is the best defense against volatility.
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