Dollar unlikely to collapse, say strategists, with Fed cuts priced in and flows supportive

Currency strategists say the U.S. dollar is more likely to consolidate than collapse in the months ahead, even as markets look toward Federal Reserve rate cuts.

Rabobank:

• argued the dollar’s scope to fall is limited in the near term, with easing already priced in and positioning skewed toward further weakness
• earlier in the year, non-U.S. asset managers sought protection against dollar downside, adding to pressure on the currency. But if much of that adjustment has already been made, one of the key headwinds should fade
• expects any further dollar decline to be gradual, with rebounds likely in the coming months

Mizuho:

• rate-cut expectations are already embedded in dollar pricing
• suggesting upcoming U.S. data and the Fed’s September decision may “temper not tear down” the greenback
• it would take more than a soft nonfarm payrolls print to significantly dent the currency
• U.S. trade policies continue to channel trade and capital flows toward the U.S., helping offset “Sell America” pressures.

This article was written by Eamonn Sheridan at investinglive.com.