Currency outlook: US dollar likely in a holding pattern through year-end

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar: Neutral.

The dollar remains caught between moderating US fundamentals and global growth divergence. As the US approaches the end of its tightening cycle and the rest of the world catches up, we will likely see investors leave the US for investment opportunities elsewhere. Taken alone, this would lead to a weaker US dollar. However, stronger domestic growth relative to the rest of the world has provided support for the US dollar, giving investors little incentive to leave. This has left the US dollar in a holding pattern which could persist through year-end. Longer term, we expect moderating growth, an increasing budget deficit and a widening current account deficit to eventually drive the US dollar lower.

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Currency outlook: China may intervene if renminbi/US dollar exchange rate reaches 7.0

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar: Neutral.

We believe the dollar is caught between two macro trends. On the one hand, US growth has positively diverged from the rest of the world, leading to increased interest rate differentials. Higher growth and larger interest rate differentials are typically positive for the US dollar. On the other hand, the US is running large budget and current account deficits. We believe these dueling factors will keep the US dollar in a holding pattern in the near term, but we expect the budget and current account imbalances to eventually drive it lower.

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Currency outlook: Convergence of global economic forces may cause weakening of US dollar

Invesco Fixed Income shares its views on currencies around the world

Time to read: 2 min

US dollar: Neutral. In our view, the US dollar remains trapped between two trends. Interest rate hikes (and ongoing balance sheet reduction) by the US Federal Reserve have increased US dollar funding costs and tightened financial conditions, further fueling the US dollar rally. However, while global growth has been strong, it does appear that US economic activity has peaked. This convergence typically causes the US dollar to weaken. If the trade environment stabilizes, this may benefit other currencies versus the US dollar in the near term.

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Currency outlook: US dollar may be caught between two opposing trends

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar: Neutral. We believe the US dollar is caught between two trends. Interest rate hikes and balance sheet reduction by the US Federal Reserve (Fed) have increased US dollar funding costs and tightened financial conditions, spurring the dollar rally. Uncertainty over trade policy has exacerbated the move. On the other hand, global growth has been strong and it appears that US economic activity, while buoyant, has peaked — a convergence that typically causes the US dollar to weaken.

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Currency outlook: We expect US dollar appreciation due to trade tensions

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar

Neutral. Trade tensions have resulted in a partial change to our view. We have revised our expectation for a broad US dollar weakening trend, now believing it may appreciate versus currencies linked to China as trade tensions increase. At this point, it appears likely any increase in tariffs may adversely affect valuations of Asian currencies (excluding Japan) such as the Chinese renminbi and Korean won.

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