Aug 4 (Reuters) – While a myriad of factors will impact the US dollar through year-end, the most important will be monetary policy decisions from the Federal Reserve — with the more hawkish its policy the better for the currency.
The next Fed policy announcement is on Sept. 21, when money markets currently price a 46% chance of a third consecutive 75 basis point interest rate hike.
If the Fed raises rates by 75 bps next month, and looks set to keep on hiking in the fourth quarter, it could propel the USD index through last month’s 20-year high of 109.29 (July 14).
Any such move would hearten the 40 out of 56 currency strategists polled by Reuters between Aug. 1-3 who said the dollar’s strength has not yet peaked.
IMM speculators held a net USD long position of USD 18.46 billion in the week ended July 26, just before the Fed raised rates by 75 bps for the second consecutive meeting (IMM speculators have been net USD long since July 2021).
(Robert Howard is a Reuters market analyst. The views expressed are his own)