U.S. dollar heading for more trouble next year: poll

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U.S. dollar heading for more trouble next year: poll

A charity receptacle at Pearson international airport in Toronto is located in the U.S. dollars and other world currencies.

A poll showed that the Federal Reserve's rates will raise interest rates to keep the mighty U.S. dollar in the driving seat, which is why the mighty U.S. dollar is heading for more trouble next year.

The currency strategists in the Oct. 29-Nov. 2 report feared that high commodity prices would further pressurise economies struggling with high inflation, which caused high commodity prices to weaken or at best cling to a range over the year.

The Fed might tighten policy sooner than signalled as higher U.S. Treasury yields are making it a stronger headwind forEM currencies, as investors bet elevated U.S. inflation could lead to more tighter U.S. Treasury yields.

The worst for the EU currencies is not yet behind us because growth and inflation challenges are coming to 2022, while U.S. 10 year Treasury yields are expected to increase relentless higher through next year, according to Phoenix Kalen, head of emerging markets research at Societe Generale.

It will be a lot dependent on how the U.S. dollar performs. The dollar was expected to dominate the currency markets for another year as inflation concerns come to the fore, with surging energy prices amid a supply crunch threatening global economic growth. A euro POLL environment in G 10 FX may have a threat to EMFX, said Luis Costa, emerging markets strategist at Citi.

The negative EMFX view was based on higher U.S. rates and continued growth fears in China. While there is risk to higher real rates in the U.S. it is hard to not expect much weaker growth in China. The Chinese yuan, the most actively traded emerging market currency, was predicted to decrease more than 1% to 6.47 per dollar in a year, as the economy slows after a strong rebound from the slump early last year.

In trade-reliant countries, China's slowdown, supply chain bottlenecks and the remaining effects of COVID-19 waves in Asia have already been affected by China's economic prospects.

The Thai baht, which has fallen about 10% so far this year, was expected to fall 1.5% more to 33.77 in the next six months. The Indian rupee, down 2.0%, was forecast to decrease more modestly, another 1.0% to 75.28 in a year.

Turkey's battered lira, which has already lost a fifth of its value this year, was expected to shed another 6% to 10.09 in a year.

The lira has been the worst performing currency among the EM peers this year due to an unconventional monetary policy that was being elected by President Tayyip Erdogan, which cuts interest rates to fight inflation. He has replaced the central bank head three times in the last 2 -- 1 2 years.

She said that Erdogan's decisions to replace more CBRT officials have undermined confidence in monetary independence which is set to prioritize stronger growth over dampening inflation.

We expect the lira to weaken further in these circumstances with a heightened risk that weakness will overshoot. A few emerging market currencies are likely to mark a stronger 2022 - especially the Russian rouble, the South African randAfrican rand, the South Korean won and the Russian rouble.

Despite the fact that the US Fed is going to begin stopping its $120 billion a month bond purchase programme, that has already sent the U.S. bond yields and the dollar higher as it is expecting a subsequent rate increase next year.

The Russian rouble will gain 1% to 71.16 as the South African Rand and Korean won in a year, while the South African Rand and Korean won over 2% in a year to 15.10 and 1141.68 respectively.