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Mary F. Calvert | Reuters
Federal Reserve Chairman Jerome Powell testifies before a House Financial Services Committee hearing on the “Semiannual Monetary Policy Report to Congress,” at the Rayburn House Office Building in Washington, U.S., July 18, 2018.
Mike Bell, investment strategist at J.P. Morgan Asset Management, told CNBC on Friday that there are factors pulling in both directions making the dollar hard to call.
“On a rate differential basis, you’d expect further dollar strength. On the other hand, you’ve got a U.S. economy that has got a fiscal deficit that is pretty large at a late cycle stage for the economy, obviously with the potential for that to deteriorate further eventually, when the economy comes into a difficult period.”
The dollar index, which measures the greenback’s performance against six major currencies, was down 0.2 percent, trading around 95.5. Since the start of the year, the dollar index is up 3.6 percent.
Stronger dollar, weaker EM?
Meanwhile, the strong dollar also weighed heavily on emerging market (EM) currencies over the last few weeks. However, as the dollar heads for a decline, EM currencies aren’t particularly impressed. A number of analysts have attributed this to domestic issues as well as policy paralysis in many countries.
“The dollar finally rose for the first time in seven sessions, which didn’t seem to help EM currencies with the added distraction of Mr Trump tweeting that he had instructed Secretary of State Mike Pompeo to ‘closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers,'” Deutsche Bank said in its morning note to clients.
