Tags: dollar | Treasury | rates | Fed

Dollar Stumbles, Confounding Bullish Forecasts

By    |   Thursday, 08 May 2014 09:34 AM

Most currency experts predicted that the dollar would rebound this year amid rising U.S. economic growth and interest rates.

But it hasn't quite worked out that way. U.S. GDP growth shrank to a paltry 0.1 percent in the first quarter, and the 10-year Treasury yield has slid to 2.59 percent from 3.04 percent Dec. 31.

Meanwhile, the Dollar Index, which measures the greenback against six major currencies, has dipped 2.5 percent since Feb. 1, falling to a six-month low.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000

The Federal Reserve's tapering of quantitative easing (QE) was supposed to lift both interest rates and the dollar.

"The wide consensus entering the year of Fed tapering equaling a stronger U.S. dollar has not come to fruition because on the stage of [QE]," Peter Boockvar, chief market analyst of The Lindsey Group, wrote in a commentary obtained CNBC.

"The Fed's balance sheet is only exceeded by the Bank of Japan as a percent of GDP."

Investor demand for European assets, particularly bonds in countries such as Spain and Italy, also has hurt the dollar. "The [currency] market will probably react more to that than to any further move in relative rates," Kit Juckes, currency strategist at Societe Generale, told CNBC.

Investor demand for Treasurys isn't helping the dollar either. "You look across the board, and it is, I think, a dollar-related move and primarily driven by lower U.S. rates," Robert Sinche, global strategist at Pierpont Securities, told Bloomberg.

"There are still tag ends of short-covering [in Treasurys] that went on after the employment number last Friday."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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Most currency experts predicted that the dollar would rebound this year amid rising U.S. economic growth and interest rates.
dollar, Treasury, rates, Fed
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2014-34-08
Thursday, 08 May 2014 09:34 AM
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