The US dollar strengthened to a near 14-year high against its peers on Thursday on strong data from the world’s biggest economy.
The greenback reached $1.0523 against the euro before retreating to $1.0551. The Japanese yen fell to an eight-month low, while China’s yuan dropped to an eight and a half year low.
“There doesn’t seem to be anything stopping US yields going higher in the near-term so I think people are going to stay on the dollar trend,” State Street Global Markets’ head of global macro strategy, Michael Metcalfe told Reuters.
“The only risk to this are that the dislocations in markets outside of the US, particularly in emerging markets, get to a point where they start to feed back into concerns (for the Federal Reserve as it looks to raise interest rates),” he added.
On Wednesday, French investment bank Societe Generale predicted euro-dollar parity by March 2017 over the bigger-than-predicted rate hike by the US Federal Reserve following Donald Trump’s presidential election victory. Soc Gen now predicts a 1.75-2.0 percent raise in rates rather than previously expected 1.25-1.50 percent. A higher US key rate means a stronger dollar.
However, not everyone is so bullish about the dollar. As Bloomberg reports, Amundi SA, which oversees about $1.2 trillion, said the greenback is unlikely to see sustainable growth in future over higher commodity prices and instability in the yuan.
A similar opinion was expressed by $119 billion asset manager from Australia, AMP Capital Investors.
“I don’t think the broad-based nature of the dollar rally is sustainable. From here the dollar rally is likely to become more selective,” said Nader Naeimi from AMP.