Investors pile into bullish dollar bets as ‘US exceptionalism’ trade returns

{"text":[[{"start":8,"text":"Investors around the world are flocking back to the US dollar in a bet that the AI boom will help the world’s biggest economy to outshine its peers this year and force the Federal Reserve to keep interest rates high. "}],[{"start":20.85,"text":"Wagers on a stronger dollar in the futures market last week rose by the most since 2018 to their highest level in more than a year, according to data from the Commodity Futures Trading Commission, a jump JPMorgan analysts attributed to investors’ renewed belief in “US exceptionalism”."}],[{"start":37.900000000000006,"text":"The currency has risen more than 2 per cent against a basket of peers since the start of the war in Iran, as investors predicted the US economy was better placed to weather a jump in energy prices than rivals in Europe and Asia. But the prospect of an end to the conflict has weakened it only slightly, as markets turn their attention to the strength of the US economy."}],[{"start":59.650000000000006,"text":"“There is a positive dollar story beyond the Iran war,” said Steven Englander, global head of G10 foreign exchange research at Standard Chartered. “The US economy is doing just fine, the fears about the labour market were overblown.”"}],[{"start":null,"text":"

"}],[{"start":72.5,"text":"The buoyancy of US stock markets, boosted by SpaceX’s blockbuster IPO and the hype around AI, has also drawn investors back to the dollar — in contrast to a period last year when Donald Trump’s erratic trade policies sapped confidence in the world’s de facto reserve currency."}],[{"start":90.75,"text":"“If you’re a foreign investor you might not like US policy or the administration but how much risk-adjusted return are you willing to give up?” Englander said. "}],[{"start":100,"text":"Underpinning the bullishness on the dollar is a sea change in investors’ view of the US economy since the start of the year. In January, futures traders were betting that the Fed would be forced to cut interest rates two or three times this year as inflation and the job market cooled. "}],[{"start":117.3,"text":"That weakness has not materialised. The US added 172,000 jobs in May, more than double Wall Street expectations. Inflation has also risen, and not just because the closure of the Strait of Hormuz has forced oil prices up. The US reported that core inflation, which strips out energy and food prices, rose to 2.9 per cent in May from 2.8 per cent in April. That has led traders to continue to bet that the Fed’s next move will probably be a rate rise even though a truce between the US and Iran has been signed."}],[{"start":149.35,"text":"Markets are currently pricing in a quarter-point increase in borrowing costs by March next year. "}],[{"start":154.95,"text":"The Fed is expected to remove the “easing” bias from its guidance on Wednesday as it announces its first interest rate decision under new chair Kevin Warsh. "}],[{"start":null,"text":""}],[{"start":164.75,"text":"By contrast, rate rise expectations have receded more quickly in economies such as the Eurozone and the UK that were hit harder by the Hormuz shock due to their dependence on energy imports."}],[{"start":177.55,"text":"The European Central Bank and Bank of England “won’t be forced to tighten aggressively into economic downturns”, said Karl Schamotta, chief market strategist at Corpay Currency Research. “The US will continue to outperform, keeping the Fed on hold.” "}],[{"start":202.00000000000003,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781677696_6271.mp3"}