Nearly two-thirds of 49 foreign exchange strategists polled by Reuters between January 4-6 said interest rate differentials would dictate sentiment in major FX markets in the near term, with only two concerned about new coronavirus variants.
“The fact the Fed is becoming much more hawkish and reacting to that by tapering much sooner than forecast a few months ago… start raising rates should support the dollar over the first part of the year,” he said. “The macro backdrop looks challenging for emerging market assets,” said Kamakshya Trivedi, co-head of global FX, rates and EM strategy at Goldman Sachs.
The Philippine peso, Malaysian ringgit and Indian rupee were also expected to weaken about 1% or at best cling to a range.