The market views a 25 basis point Fed rate hike next week as a near certainty, based on fed fund futures. Contracts on Thursday showed more than 45 basis points of total tightening by the end of 2018. Focus is increasingly shifting to the outlook for next year, with investors moving closer to the central bank’s projected path of three rate hikes for 2019.
That won’t be enough to prop up the greenback, according to Noelle Corum, an Atlanta-based portfolio manager in Invesco Ltd.’s fixed-income group. As global growth improves and market participants start to speculate about policy changes from the European Central Bank and Bank of Japan, the dollar’s support from Fed hikes and trade tensions will wear off, she said.
“Going into year-end, we would expect fundamentals will begin to drive markets again, and this will drive the dollar weaker,’’ said Corum, whose group manages $235 billion. She forecasts the greenback will depreciate to $1.20 per euro and weaken to 104 yen per dollar by year-end.
US Treasury yields popping above 3%, not least because of the dearth of demand following the front loading of pension contributions that ended on September 15th, has been a catalyst for both bond and Dollar weakness this week.Click HERE to subscribe to Fuller Treacy Money Back to top