The US dollar certainly had a good 2015, at least so far.
The team at Credit Suisse sees further gains into 2016:
Here is their view, courtesy of eFXnews:
“In January 2015 we noted that the main common trait of structural USD bull markets at the balance of payments level was that any current account deficit was financed entirely by FDI and private portfolio investments. Official central bank inflows were not the drivers of dollar strength.
As we approach the 2015 finish line, and with the USD broad NEER up almost 9% YTD, we revisit the analysis its implications for the USD outlook.
We find that a twin surge in FDI and private portfolio investment balances has more than offset the decline in official portfolio inflows caused by declining EM reserves.
With policy in Europe and Japan actively pushing domestic investors abroad, and with EM experiencing ongoing growth challenges, we think the outlook for the funding of the US current account deficit is strong.
..In summary, with the US’ GDP growth differential relative to the rest of the world widening in the US’s favor, and with monetary policy outside of the US actively pushing domestic investors abroad, we think the outlook for FDI and portfolio flows in the US is constructive.
As such, we see potential for the benign funding conditions described above to remain in place for several months to come. We think this provides a solid backdrop for the USD to rally further into 2016.”
Alvise Marino – Credit Suisse
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