Title: Nomura Analysts Forecast Continued Weakness in USD, Especially in Asian Markets
Investing.com — In a recent note, Nomura analysts predict ongoing weakness in the U.S. dollar, particularly in Asian markets. This outlook is driven by various macroeconomic factors, positioning adjustments, and portfolio reallocations that are expected to exert downward pressure on the USD in the upcoming months.
One of the key factors contributing to this forecast is the anticipated narrowing of the growth differential between the U.S. and Europe. The U.S.’s growth outperformance is expected to weaken, with the GDP growth gap between the U.S. and the EU projected to narrow significantly in the coming quarters.
Nomura analysts also highlight the potential for speculative positioning to shift towards short positions on the USD. This could be influenced by increased portfolio allocation towards Emerging Markets (EM) in Asia, as well as unwinds of USD accumulation by various entities.
Moreover, foreign portfolio investments into Asia are expected to rise, driven by a recovery from previous outflows. Real money investors may also reallocate their positions in Asian bonds, further impacting the USD’s strength.
Historically, the USD has tended to weaken around the time of the first Federal Reserve rate cut, which is expected to occur in September 2024. This could lead to further USD weakness, particularly against Asian currencies, as seen in previous rate cut cycles.
China’s economic situation remains a crucial factor in this forecast, with potential policy measures aimed at stabilizing the property market likely to support further USD weakness. A more stable Chinese economy could boost confidence in Asian currencies, contributing to the USD’s decline in the region.
The upcoming U.S. presidential election adds another layer of uncertainty to the USD’s outlook. While current polls suggest a potential Democratic win, uncertainties surrounding a potential Trump victory could lead to USD volatility, especially if policies targeting the currency are prioritized.
In conclusion, Nomura’s analysis points towards continued weakness in the USD, particularly in Asian markets, driven by a combination of macroeconomic factors, positioning adjustments, and external events like the U.S. presidential election. This forecast could have significant implications for investors and individuals, highlighting potential shifts in currency values and the broader economic landscape.