Big names like Barclays, Morgan Stanley, and National Australia Bank are hinting that confidence in the US dollar is waning. Recent data shows that interest in new dollar bets is the lowest it’s been in two months. Even with US Treasury rates reaching their highest in over ten years, the dollar hasn’t surged as expected. Barclays’ Themistoklis Fiotakis notes, “The big dollar hype might just be overhyped.”
This isn’t the first time experts have predicted the dollar’s decline, only to see it bounce back. After a dip in July, the dollar experienced a significant upswing. The recent Middle East unrest has also sporadically boosted the dollar’s appeal. Even the Bank of Japan’s recent actions didn’t deter the dollar’s climb.
However, recent surveys suggest the excitement for the dollar might have hit its peak last month. Many, including Fiotakis, believe the dollar market is saturated. Data from CFTC indicates that the most speculative dollar bets reached their highest since July. Signals from the options sector also suggest caution.
Short-term measures indicate that dollar enthusiasts aren’t eager to invest at its current levels. JPMorgan predicts the dollar will remain stable in the coming months. However, some, like Johanna Kyrklund of Schroder Investment Management, argue the dollar still stands strong due to a lack of credible alternatives. She likens the rumors of the dollar’s decline to the famous phrase, “the reports of my death are greatly exaggerated.”
But overall excitement for the dollar appears to be plateauing. A recent survey showed a slight drop in expectations for the dollar’s growth. Historically, the dollar has only maintained a specific high level on a couple of occasions in the past decade.
Morgan Stanley’s James Lord and David Adams recently advised clients to reconsider their dollar investments. They believe that many positive factors, like high yields and the US’s robust economy, are already accounted for in the dollar’s value.
Gareth Berry from Macquarie Group sees a possible short-lived boost for the dollar as investors seek stability. But, he warns that with US interest rates likely capping soon, time might not favor the dollar much longer.