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Source: ONE News -
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Strong job numbers in the United States on Friday saw the
greenback post its biggest one day gain in a year, prompting some
to question whether this year's trend of a weak US currency is
turning around.
Visiting currency strategist Todd Elmer from US banking giant
Citigroup says it is too early to call it a trend, but he does
believe the US is on the cusp of a regime change.
He believes good news like the latest job numbers data will help strengthen the dollar, whereas during the past year good news has typically boosted risk appetite for other currencies.
"We think that the market over time is going to pay more attention to these underlying fundamentals and that presents a somewhat more benign environment for the US dollar," says Elmer.
He says at the moment, US authorities appear to be comfortable with a weaker dollar as there are no signs that it is destabilising other asset markets.
However, if the dollar was to weaken further, it may create some concern, thought Elmer believes authorities are a long way from stepping into the market to stem any decline.
He says Citigroup believes the US Federal Reserve will not raise interest rates until the last quarter of 2010, thought they anticipate a rise in market interest rates well in advance.
If the US dollar strengthens, Elmer predicts the kiwi dollar will pull back, having borne the brunt of US dollar weakness.
He says there is evidence the Kiwi has gone too far, too fast, outpacing moves in interest rates.
However, he says Citigroup does not believe there will be a large pullback in the kiwi dollar.
The kiwi dollar was trading at US71.60 cents on Tuesday morning and rose as high as US75.82 cents on October 23.
