As dollar roars higher, few dare to stand in its way
An epic rally in the dollar has investors wondering how much further it can run, though many are biding their time before turning bearish on the US currency.
The dollar is up about 13% this year to a two-decade high against a basket of peers and is on pace for its best year since 1997, lifted by a hawkish Federal Reserve and investors seeking a haven from global economic uncertainty, Reuters reports.
Its steady climb has rippled through markets, helping push the euro EUR= to its lowest level in more than two decades and weighing on the earnings of U.S. corporations such as Microsoft MSFT.O and BlackRock BLK.N.
The extent of the dollar’s strength has taken markets by surprise.
A model used by BoFA Global Research comparing macroeconomic fundamentals in different economies, for example, last month showed the dollar was overvalued against the currency of every G10 country. Moreover, history shows that while the greenback tends to strengthen before a Fed hiking cycle, it begins to fall soon after, a pattern it has so far deviated from.
Still, the dollar’s momentum has made investors hesitant to stand in its way.
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