BENGALURU : The U.S. dollar will claw back some of its recent losses over the coming three months on expectations financial markets have again gone too far in pricing in too many Federal Reserve interest rate cuts this year, a Reuters poll of foreign exchange strategists found.
After rising about 5 per cent for the year, the greenback lost more than half its gains against a basket of major currencies in recent weeks amid sluggish U.S. economic data fuelling expectations of multiple Fed rate cuts, starting in September.
Yet with policymakers pushing back against speculation that recent weakness in economic data would translate into recession, markets may yet again be forced to temper their rate cut expectations. "Are markets getting carried away? Naturally, I'd say yes, but it's difficult to stand in front of that speeding train in the very short term because this type of overreaction can persist," Mackel added."You need to be very careful when volatility is this high and you're not used to it coming back so quickly."The Japanese yen, which started its latest upward march against the U.S. dollar after the Bank of Japan raised its overnight call rate to 0.
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