The dollar will gain within the next six months amid speculation the Federal Reserve will raise interest rates next year for the first time since 2006 as the U.S. economy improves, Citigroup Inc.’s Steven Englander said.
“The one thing the currency market doesn’t argue with is success,” Englander, the bank’s global head of Group of 10 foreign-exchange strategy in New York, said in an interview on Bloomberg Radio’s “Surveillance” with Carol Massar. “What investors are looking at is the hope that the U.S. economy is normalizing, and the view that it’s normalizing a lot faster than Europe and Japan are.”
The dollar has lost 0.8 percent this year in a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has gained 3.6 percent as investors sought safety amid turmoil in Ukraine and the Middle East, while the euro has fallen 2 percent.
The U.S. currency appreciated 0.4 percent to $1.3593 per euro today in New York trading. The greenback fell 0.3 percent to 101.31 yen.
The European Central Bank and the Bank of Japan are moving to stimulate economic growth. Traders see a 70 percent chance the U.S. central bank will raise its benchmark interest-rate target by September 2015, federal-funds futures show. Policy makers have kept it in a range of zero to 0.25 percent since 2008 to support the economy.
“Longer-term, I do have some concerns about the role of the dollar in international currency markets,” Englander said. “We are looking at many countries trying to un-dollarize the transactions. There are some concerns that using the dollar brings regulatory burdens that transactors want to avoid.”