Uncertainty about US rate path will support USD

April 11 – Uncertainty about the path of U.S. interest rates will support the dollar which is the highest yielding major currency and therefore a good place to park cash while investors await clearer signals on where rates are heading.

Expectations for interest rates have swung wildly in the past nine months. Last summer traders were convinced rates would remain high for a long time. By the end of 2023 they were expecting a dramatic and rapid drop beginning in March.

Following the March CPI report less than 50 basis points of easing is expected this year, and the first cut is not seen happening until September.

The view that emerged last summer about rates staying high for long has proved correct, and a U.S. interest rate that looks set to remain above 5 percent throughout 2024 is attractive.

Those who purchase dollars know they it’s very liquid and, as the world’s reserve currency, it’s also considered a safe haven in uncertain times.

One of the main risks for those investing in dollars is those who have already done so. Speculation on dollar rising has quadrupled recently and assets many hold are less safe. BOJ intervention could spark a sudden drop.

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)