November 23 (Reuters) – The dollar may come under more pressure in December with traders, who typically reduce exposure towards the end of the year, more inclined to reduce bets on the greenback rising thanks to rapid changes in expectations for US interest rates, which have shifted from hikes to cuts in. a few weeks.
The maximum for a longer US rate view quickly unraveled with no chance of more of the hikes that were looked at in September. Instead traders face the risk of a much earlier interest rate cut in May and the potential for 100bps of easing by the end of next year.
Businessmen are badly positioned for changes, they testify that they bought dollars to bet against every Asian currency in a Reuters FX survey, and increasing bets against the yen and Canadian dollars to unusually high levels. They are also betting that the dollar rises against the pound, Swiss franc and Australian and New Zealand dollars.
The big drop in oil, which this week traded more than $20/bbl below the levels seen when the Federal Reserve delivered its surprisingly hawkish view in September, will also undermine the greenback.
There is less inflation in the pipeline, which should sway US policymakers towards the much more dovish views reflected by financial markets. Cheaper oil will also undermine currencies of exporters such as the US while supporting currencies of nations that import such as Japan, China, India, Switzerland, the UK and the eurozone.
There is plenty of potential support for currencies like INR, CNY and JPY, which traders sold aggressively and fell to record lows. These coins have the most potential to bounce back.
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
((jeremy.boulton@thomsonreuters.com))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
