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Who will be proven right?
(1) MPS chief strategist Luca Mannucci, who warns that the greenback could plunge as much as 5% against other currencies in the second half or (2) John Lynch, chief investment officer at Comerica Wealth Management, who warns that investors shouldn’t expect the dollar to weaken anytime soon?
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The U.S. Dollar Index (USDX)
The dollar index tracks the relative value of the U.S. dollar against a basket of important world currencies. If the index is rising, it means that the dollar is strengthening against the basket – and vice-versa.
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The U.S. Dollar Index (USDX) is a relative measure of the U.S. dollars (USD) strength against a basket of six influential currencies, including the Euro, Pound, Yen, Canadian Dollar, Swedish Korner, and Swiss Franc. The index was created in 1973, but remains useful to this day. The USDX can be used as a proxy for the health of the U.S. economy and traders can use it to speculate on the dollar’s change in value or as a hedge against currency exposure elsewhere.
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An index value of 120 suggests that the U.S. dollar has appreciated 20% versus the basket of currencies over the time period in question. Simply put, if the USDX goes up, that means the U.S. dollar is gaining strength or value when compared to the other currencies.
Similarly, if the index is currently 80, falling 20 from its initial value, that implies that it has depreciated 20%. The appreciation and depreciation results are a factor of the time period in question.
https://www.investopedia.com/terms/u/usdx.asp
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Italy’s MPS Capital Services Banca per le Imprese SpA, part of the banking group that includes Banca Monte dei Paschi di Siena SpA, scored top position in Bloomberg’s accuracy rankings for the first quarter of 2023.
Now, MPS chief strategist Luca Mannucci is warning that the greenback could plunge as much as 5% against other currencies in the second half.
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John Lynch, chief investment officer at Comerica Wealth Management, warns that investors shouldn’t expect the dollar to weaken anytime soon.
“We look for the greenback to nudge higher in the months ahead as Fed policy persists and global investors seek higher-yielding opportunities,” says Lynch. “This will likely place a temporary headwind on domestic and emerging market equities.”
https://www.forbes.com/advisor/investing/strong-dollar/
Wayne Duggan Contributor
Reviewed By Paul Katzeff editor
Updated: Mar 21, 2023, 3:36pm
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The U.S. Dollar Index started 2022 in a solid uptrend. From late April through late September, the Dixie—as the index is often called—ripped to new 20-year highs. U.S. tourists traveling abroad were big beneficiaries, but the dollar’s rapid climb pressured earnings growth for U.S. companies that have overseas units.
The dollar started to cool in the final quarter of 2022 as the Federal Reserve hammered rising inflation with interest rate increases.
So far in 2023, inflation and interest rate expectations have whipsawed back and forth. The dollar has responded largely in kind.
In early March, the dollar hit its highest level since November, before investors’ concerns over stability of the U.S. banks triggered a sharp reversal in the dollar.
The USDX is now up 0.89% for 2023 as of midday March 16, and it’s up 6.6% from a year ago.
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With the U.S. economic outlook for 2023 uncertain, the path forward for the U.S. dollar could have significant implications for inflation, international trade, technology stocks and fiat currency alternatives such as gold and Bitcoin (BTC).
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John Lynch, chief investment officer at Comerica Wealth Management, warns that investors shouldn’t expect the dollar to weaken anytime soon.
“We look for the greenback to nudge higher in the months ahead as Fed policy persists and global investors seek higher-yielding opportunities,” says Lynch. “This will likely place a temporary headwind on domestic and emerging market equities.”
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weehingthong 