Trump's policies to drive FX, but strong dollar here to stay: Reuters Poll

Tue Feb 7, 2017 9:54am EST
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By Rahul Karunakar

(Reuters) - The dollar will resume its upward climb in the coming year, but extreme near-term moves in either direction are possible, driven more by U.S. President Donald Trump's expected fiscal stimulus than by his words, a Reuters poll found.

After mostly gaining over the past three years, the dollar hit a wall in January, marking its biggest losses in three decades on concerns about the Trump administration's preference for a weak dollar and a radical policy on immigration.

In 2016, the dollar was down less than one percent until the U.S. election on Nov. 8. It then reversed course to end the year over 4 percent higher, something FX strategists polled by Reuters had not predicted before the vote.

Instead, they had said the dollar was likely to fall in the immediate aftermath if Trump were to win.

So far this year, concern over Trump's attitude to the dollar and global trade has pushed the currency down over 2 percent and pushed Treasury yields lower.

Speculators also cut bets in favor of the dollar for the fourth straight week. Net long positions fell to their lowest since last October, data from the Commodity Futures Trading Commission and calculations by Reuters showed.

Still, the latest poll of over 60 FX strategists, taken Feb 3-6, showed the bias was towards a stronger dollar over the coming year once the fog clears around the White House's tax and spending plans.

Six of the top 10 most accurate forecasters in Reuters polls last year are still forecasting broad dollar gains.   Continued...

FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/File Photo