‘MOMENT OF TRUTH’ FOR THE DOLLAR PREDICTED

THE DOLLAR is poised to slide into a “modest bear market” as Treasury yields collapse on the back of the Federal Reserve’s dovish pivot. That’s the view of Amundi Pioneer Asset Management’s Paresh Upadhyaya, who says Intercontinental Exchange’s US Dollar Index may drop 5 percent to 10 percent from current levels as US short-term interest rates fall closer to yields in the rest of the world. The gauge’s decline to its 200-day average price signals a “moment of truth,” tweeted Jeffrey Gundlach, chief executive officer at DoubleLine Capital. Treasury 10-year yields fell to 1.97 percent on Thursday, the lowest since 2016, while markets are pricing in more than 25 basis points of easing at the Fed’s July meeting. The Dollar Index has tumbled 1.1 percent in June, heading for the biggest monthly loss this year. The 200-day moving average was at 96.633 points on Friday. “It is hard to imagine global central banks out-easing the Fed in the coming months since everyone has run out of ammo with negative rates, compared to the Fed that has a nice cushion,” Upadhyaya said on Thursday. “This marks the green light for the start of the US dollar bear market.” The bearish outlook marks a slight shift for Upadhyaya, who before the latest Fed meeting said a depreciation in the dollar could take months to materialise, keeping the door open for a slow move. “If the data remains sound and if there are signs of an impending deal” between the US and China, the Fed could “hold its fire”, Upadhyaya said. “While it looks like a rate cut in July is a done deal, the door is not entirely closed for a pass at the July meeting.” But there are still plenty of factors on the greenback’s side. Treasury yields remain relatively high compared with other developed markets, with the world’s stockpile of negative-yielding bonds topping $13 trillion (R185.85trln). I Bloomberg