THE US dollar’s rise is likely over as the central banks of Japan and Europe are not inclined towards further easing, said Alain Bokobza, a strategist with French bank Societe Generale (SocGen).
The Japanese yen and the euro are the two most important currencies in the world the US dollar is traded against, explained Mr Bokobza, the bank’s global head of asset allocation for corporate and investment banking.
If the two central banks do not see the need for looser monetary policy beyond what is already being done, there is little reason for the US dollar to appreciate, pointed out Mr Bokobza in a Singapore media briefing on Monday morning.
Meanwhile, he expects the US Fed to tighten monetary policy very gradually, with a 25 basis point (0.25 percentage point) hike this December and three such hikes next year. The implication of a flat US dollar is that commodity prices have room to rise, he noted.
Currencies in emerging Asia, however, can still fall next year as they are sensitive to a slowing China, he added.
According to Mr Bokobza, aggressive monetary policy easing by China has the potential to cause the yuan to tank, which will drag down Asian currencies and be a threat to global stability.
He is forecasting a 6 per cent depreciation in the yuan against the US dollar. But depreciating Asian currencies are not a bad thing as economies here will become more competitive, he felt. “We recommend buying after the devaluation, rather than before.”