Investors are betting a weaker U.S. dollar will further boost a rally that has seen stocks, emerging market currencies and other risky assets soar in recent weeks.
The S&P 500 is up 46per cent from its late-March low, while the Nasdaq recently marked a new bull market. Because of the dollar's central role in the global financial system, its fluctuations tend to have widespread repercussions. A weaker dollar also tends to be a tailwind for oil and other raw materials, which are denominated in dollars and become more affordable to foreign buyers when the U.S. currency declines. The S&P/Goldman Sachs Commodity Index has rallied about 45per cent over the last 30 days.
An investor selling dollars and buying the Brazilian real, for instance, would have earned 17.4per cent over the last month accounting for the difference in yield and the real's swift rise from recent lows, according to Cambridge Global Payments data through Monday. The Mexican peso has returned nearly 10per cent in the same period, and the Russian ruble 7.7per cent.
Some believe the dollar's losses may be limited. The gap between U.S. rates and those in Europe and Japan - where many borrowing costs are negative - is unlikely to narrow much further in the near term, with the Fed opposed to moving borrowing costs below zero.
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Source: BusinessTimes - 🏆 15. / 51 Read more »