Wall Street predicts a difficult year for the dollar

2017 was for the American currency one of the worst in the last decade. By the end of the year, the dollar index is in danger of recording a record decline since 1997. And analysts from Wall Street believe that in 2018 this trend will continue.

Although the dollar index fell by 8.6% this year, it remains 25% higher than the low of 2011, and in real terms the rate is 5% higher than the average for 20 years, according to Societe Generale analysts. The bank forecasts a 4.5% decline in the index by the end of 2018.

The Fed’s desire to tighten monetary policy, rapid economic growth, the possible resumption of the “Trump effect,” according to Bloomberg experts, is insufficient to support the dollar next year.

Analysts say that a gradual reversal of the post-crisis “bullish” trend in the dollar will occur next year against the backdrop of accelerating global economic growth and a more rigid rhetoric of central banks.

“Beware of dormant volcanoes and highly undervalued currencies, in conditions where the growth of the world economy becomes more balanced and more synchronous, the dollar looks expensive,” Societe Generale SA strategist Keith Juks wrote in a survey on Tuesday.

Traditional valuation models should partially restore their reputation, as central banks will become more tolerant towards strengthening currencies, and yields in overseas markets will grow, analysts say.

“We think that 2017 was a turning point for the dollar. While the world economy continues to grow at a steady pace, barriers remain for reflationary trends and there is no sudden and isolated jump in inflation in the United States, the global makrokartina should promote sustainable weakening of the dollar, “-. Said currency strategist at TD Securities Inc. Ned Rumpeltin

If in the first half of next year the current balance can generally remain, then in the second half of the year the dollar may experience even greater pressure, as interest rate markets lay down incentive reduction in prices European Central Bank, analysts say.

Most likely, in order to give dollar “bulls” hope, it would take a “hawkish” shock from the Federal Reserve System, coupled with a significant increase in real rates of return.