cawacko
Well-known member
Interesting the dollar got stronger right after the election on expectation of fiscal stimulus and then has been dropping ever since. Doing a google search on the dollar at the beginning of the year show a number of predictions that the dollar would continue to strengthen. Clearly it hasn't.
The Dollar Swoon Lifting U.S. Stocks Is Seen Continuing
Bets on the greenback’s weakness is increasing—a result that would benefit commodities, emerging markets
A growing investor consensus that the weak dollar will keep weakening is rippling around the world, fueling rallies in everything from U.S. stocks to commodities.
The dollar has been suffering through one of its worst stretches in years, weighed down by scant inflation and doubts whether the Federal Reserve will raise rates anytime soon.
The U.S. currency rallied on Friday after a strong U.S. jobs report, but it remains down roughly 7% against a basket of currencies since the start of the year and has declined for five straight months.
President Donald Trump’s election victory last November had sparked a brief dollar rally, as the market counted on policies such as tax cuts and infrastructure spending to boost the economy, and the dollar with it. But with gridlock in Washington, D.C. putting those policies in doubt, many believe the dollar stands to fall further.
Investors last week held roughly $7.9 billion in bets on a weaker dollar, the biggest bearish position since early 2013, Commodity Futures Trading Commission data show.
That leaves some analysts concerned that a change in the economic or political outlook could send investors scrambling to cover bets against the currency, potentially sparking a dollar rally and a snapback in other assets.
Because the dollar is the global currency, any significant change in its value ripples throughout financial markets.
“The broad-based nature of the dollar touches everything,” said Alan Robinson, global portfolio adviser at RBC Wealth Management, which oversees $294 billion. “We believe the dollar is moving into a bear cycle, and this is pushing us to make sure our portfolios are properly positioned.”
A weaker dollar is typically good for shares of U.S. exporters, making their products cheaper for overseas buyers. S&P 500 companies got about 43% of their sales abroad at the end of 2016, according to S&P Dow Jones Indices.
Companies including PepsiCo Inc. and railroad CSX Corp. recently cited the weak dollar as helping lift earnings, providing another level of support for a long stock market rally that many think looks stretched. Morgan Stanley estimates that profits for companies in the S&P 500 increase by 1% for every 2% decline in the dollar.
A falling dollar helps commodities, too, which are priced in the U.S. currency and become more affordable to foreign investors when the dollar declines. The S&P GSCI commodity index recently closed out its best month of the year, up more than 4% in July.
That is also good news for commodity-exporting emerging markets, where stocks are up around 24% this year.
The opportunity in emerging markets “is as big as anything we have seen since the mid-90s,” said Lance Humphrey, who oversees $6.4 billion as a global multiasset portfolio manager at USAA, a fund manager. He has increased positions in exchange-traded funds that target value in emerging markets, which contain holdings in Brazil and Russia.
Signs that central banks plan to wind down the easy-money policies that have helped boost risky investments hurt assets in developing countries last month, when flows into emerging market funds slowed or even turned negative.
But those fund flows have picked up again recently, analysts say, in part because of the weakening dollar. A weaker U.S. currency makes it easier for these countries to pay back their dollar-denominated debt.
The dollar’s decline, however, can cause challenges for European companies by making their exports less competitive and their U.S. sales worth less when translated back into euros. That is dampening expectations after new signs of economic growth in the region had turned many investors bullish.
“When you look at the stronger euro, it’s clearly a risk for eurozone equities, especially large caps,” said Ankit Gheedia, strategist at BNP Paribas.
At $1.1774, the euro is up 12% against the dollar so far this year, although the currency remains far weaker overall than during most of the past decade.
The Stoxx Europe 600 auto sector, which generates over half its of revenues overseas according to FactSet, has fallen around 1.6% in the past month as the euro has strengthened against the dollar and is down for the year.
With the euro strengthening, Europe’s earnings revisions ratio recently moved from a seven-year high in mid-May to an 11-month low, according to analysts at Morgan Stanley. Analysts say this could become even more of an issue for European corporations in the third quarter if the dollar weakness continues.
In Tokyo, the Nikkei Stock Average is up only around 4.4%, underperforming many major markets. The dollar’s weakness against the yen is a big factor behind the lag, investors say.
Some money managers aren’t ready to count the dollar out, and the currency’s rally on Friday raised their hopes. The WSJ Dollar Index gained 0.5% after the Labor Department said nonfarm payrolls rose by 209,000, beating estimates, and the unemployment rate fell to a 16-year low of 4.3%.
“The dollar has been oversold,” said James Athey, senior investment manager at Aberdeen Asset Management. “If Trump achieves anything, it’s just icing on the cake.” He is betting the dollar will rise against the euro and Japanese yen in the months ahead.
But even if the rebound continues, many investors say it would more likely represent a pause than a turnaround without U.S. rates moving higher or further indications that economic growth is picking up.
https://www.wsj.com/articles/investors-chase-beneficiaries-of-dollars-decline-1502103600
The Dollar Swoon Lifting U.S. Stocks Is Seen Continuing
Bets on the greenback’s weakness is increasing—a result that would benefit commodities, emerging markets
A growing investor consensus that the weak dollar will keep weakening is rippling around the world, fueling rallies in everything from U.S. stocks to commodities.
The dollar has been suffering through one of its worst stretches in years, weighed down by scant inflation and doubts whether the Federal Reserve will raise rates anytime soon.
The U.S. currency rallied on Friday after a strong U.S. jobs report, but it remains down roughly 7% against a basket of currencies since the start of the year and has declined for five straight months.
President Donald Trump’s election victory last November had sparked a brief dollar rally, as the market counted on policies such as tax cuts and infrastructure spending to boost the economy, and the dollar with it. But with gridlock in Washington, D.C. putting those policies in doubt, many believe the dollar stands to fall further.
Investors last week held roughly $7.9 billion in bets on a weaker dollar, the biggest bearish position since early 2013, Commodity Futures Trading Commission data show.
That leaves some analysts concerned that a change in the economic or political outlook could send investors scrambling to cover bets against the currency, potentially sparking a dollar rally and a snapback in other assets.
Because the dollar is the global currency, any significant change in its value ripples throughout financial markets.
“The broad-based nature of the dollar touches everything,” said Alan Robinson, global portfolio adviser at RBC Wealth Management, which oversees $294 billion. “We believe the dollar is moving into a bear cycle, and this is pushing us to make sure our portfolios are properly positioned.”
A weaker dollar is typically good for shares of U.S. exporters, making their products cheaper for overseas buyers. S&P 500 companies got about 43% of their sales abroad at the end of 2016, according to S&P Dow Jones Indices.
Companies including PepsiCo Inc. and railroad CSX Corp. recently cited the weak dollar as helping lift earnings, providing another level of support for a long stock market rally that many think looks stretched. Morgan Stanley estimates that profits for companies in the S&P 500 increase by 1% for every 2% decline in the dollar.
A falling dollar helps commodities, too, which are priced in the U.S. currency and become more affordable to foreign investors when the dollar declines. The S&P GSCI commodity index recently closed out its best month of the year, up more than 4% in July.
That is also good news for commodity-exporting emerging markets, where stocks are up around 24% this year.
The opportunity in emerging markets “is as big as anything we have seen since the mid-90s,” said Lance Humphrey, who oversees $6.4 billion as a global multiasset portfolio manager at USAA, a fund manager. He has increased positions in exchange-traded funds that target value in emerging markets, which contain holdings in Brazil and Russia.
Signs that central banks plan to wind down the easy-money policies that have helped boost risky investments hurt assets in developing countries last month, when flows into emerging market funds slowed or even turned negative.
But those fund flows have picked up again recently, analysts say, in part because of the weakening dollar. A weaker U.S. currency makes it easier for these countries to pay back their dollar-denominated debt.
The dollar’s decline, however, can cause challenges for European companies by making their exports less competitive and their U.S. sales worth less when translated back into euros. That is dampening expectations after new signs of economic growth in the region had turned many investors bullish.
“When you look at the stronger euro, it’s clearly a risk for eurozone equities, especially large caps,” said Ankit Gheedia, strategist at BNP Paribas.
At $1.1774, the euro is up 12% against the dollar so far this year, although the currency remains far weaker overall than during most of the past decade.
The Stoxx Europe 600 auto sector, which generates over half its of revenues overseas according to FactSet, has fallen around 1.6% in the past month as the euro has strengthened against the dollar and is down for the year.
With the euro strengthening, Europe’s earnings revisions ratio recently moved from a seven-year high in mid-May to an 11-month low, according to analysts at Morgan Stanley. Analysts say this could become even more of an issue for European corporations in the third quarter if the dollar weakness continues.
In Tokyo, the Nikkei Stock Average is up only around 4.4%, underperforming many major markets. The dollar’s weakness against the yen is a big factor behind the lag, investors say.
Some money managers aren’t ready to count the dollar out, and the currency’s rally on Friday raised their hopes. The WSJ Dollar Index gained 0.5% after the Labor Department said nonfarm payrolls rose by 209,000, beating estimates, and the unemployment rate fell to a 16-year low of 4.3%.
“The dollar has been oversold,” said James Athey, senior investment manager at Aberdeen Asset Management. “If Trump achieves anything, it’s just icing on the cake.” He is betting the dollar will rise against the euro and Japanese yen in the months ahead.
But even if the rebound continues, many investors say it would more likely represent a pause than a turnaround without U.S. rates moving higher or further indications that economic growth is picking up.
https://www.wsj.com/articles/investors-chase-beneficiaries-of-dollars-decline-1502103600