DOLLAR EXPOSED TO DYSFUNCTION AND PARALYSIS IN WASHINGTON
NEW YORK — Mounting political risks from Washington are adding to reasons for traders to be bearish about the dollar as the market hurtles toward the end of 2018.
Most forecasters were already predicting that the greenback, which this month touched its strongest level in a year and a half, would be in for a rougher time in 2019. Much of that stemmed from views about the outlook for economic growth in the US and elsewhere, as well as predicted central bank policy developments and concern about a potential policy mistake from the Federal Reserve. But heightened political dysfunction, government paralysis and potential threats to the independence of the Fed are now adding to the complication.
“The markets continue to reel from last week’s gut-punch from the Fed, topped off with a heaping portion of shutdown fears and heightened geopolitical risk,” said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. “The dollar has held up relatively well in light of recent developments, but it remains vulnerable to a loss of confidence in US policy makers.”
The greenback’s slide in holidaythinned trading on Monday underscored those risks. It fell against most of its Group-of-10 peers following weekend news that the US government had gone into partial shutdown amid political wrangling and that President Donald Trump has raised the specter of potentially firing Fed Chairman Jerome Powell.