Goldman Sachs declares dominance and strengthening of dollar
2023.01.12 07:16
Goldman Sachs declares dominance and strengthening of dollar
By Tiffany Smith
Budrigannews.com – Since its rivals have failed to challenge the dollar’s position as the world’s most valuable currency, new rallies are likely.
That’s what Goldman Sachs (NYSE:) is thinking. analyst Isabella Rosenberg says that in recent months, signs of global growth have made assets in Europe and China more appealing, but she sees little evidence that foreign investors are rushing to support either currency.
Rosenberg wrote, “The dollar has peaked in line with our forecasts, but downside looks limited by limited appetite for euro and yuan assets so far.” One of the main reasons we anticipate phases of renewed dollar appreciation in the upcoming months is the absence of a distinct “challenger” to the dollar’s dominance.
The dollar surged last year as a result of aggressive US rate hikes and demand for safe haven assets. A gauge of the strength of the dollar reached an all-time high in late September, but the rally has been stifled by the Federal Reserve’s easing of interest-rate increases. Rosenberg claims that analysts at the bank have since lowered their projections for dollar gains in the near future.
The Bloomberg Dollar Spot Index, which compares the currency to a group of major peers, has fallen by more than 8% since its peak and continued to fall in early 2023 even as the euro and other major currencies have risen.
On Wednesday, the euro rose for the fourth day in a row while the yuan approached August highs.
Even so, there hasn’t been much inflow from abroad. Rosenberg suggested that supply constraints in Europe and returns on fixed income that are “relatively unattractive” in China may be to blame.
Rosenberg stated in his writing, “We expect dollar downside to remain constrained” unless the global growth backdrop improves more materially.
More FX markets are waiting for CPI data
