According to reporting by Bloomberg, shorting the US Dollar in 2019 is an increasingly popular wager amongst forex strategists as the Fed seems more likely to begin preparing for a pause on rates.
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The greenback is 10 percent to 15 percent overvalued, according to Morgan Stanley. A Bloomberg survey of foreign-exchange forecasters shows losses are expected for the greenback against traditional haven currencies such as the yen and Swiss franc. The median forecast for the dollar-yen pair is that it will drop from its current level near 113 yen to 108 yen by the end of 2019.
Of course, the dollar was also widely expected to lose in 2018, but the Bloomberg Dollar Spot Index rallied starting in April as the Fed continued with gradual rate hikes, the American economy outperformed the rest of the world and trade tensions ramped up between the U.S. and China. The index has risen about 4.1 percent this year.
Along with a weaker dollar, another popular Wall Street currency forecast calls for a stronger yen in 2019. The yen could climb if the Bank of Japan continues to loosen its hold on Japanese government-bond markets during the first half of next year, TD said. Bond yields could rise further, with “more balanced” rate differentials encouraging Japanese investors to bring assets back home, the firm wrote.
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