JPMorgan Sees Dollar Surge as Advance Falters Near 7-Month High

  • Dollar may not peak till late 2016, JPMorgan's Normand says
  • ANZ says correction in greenback likely to continue for now

JPMorgan Chase & Co. is keeping faith in the dollar, even as its advance stuttered near a seven-month high versus the euro.

The U.S. currency declined for a second day against most of its major peers Wednesday after data Tuesday showed U.S. consumer confidence unexpectedly declined in November to the lowest level in more than a year. The greenback pared its biggest monthly advance against the euro since March, as investors watched for clues the U.S. economy is strong enough to handle a first interest-rate increase in almost a decade next month.

“The dollar deserves to surge at least once more this cycle,” John Normand, the bank’s London-based head of foreign exchange, commodities and international rates research, wrote in a client note dated Nov. 24. “A USD peak will come but not at the first Fed hike and maybe not until mid/late 2016.”

The dollar slid 0.3 percent to $1.0670 per euro as of 7:03 a.m. in London, extending a 0.1 percent decline Tuesday. It has strengthened more than 3 percent this month, and touched $1.0593 on Monday, a level unseen since April 15. The greenback slipped 0.2 percent to 122.32 yen.

The Bloomberg Dollar Spot Index, which tracks the currency versus 10 major peers, fell 0.2 percent to 1,228.14. The gauge has still risen 1.5 percent in November.

Dollar Bulls

Hedge funds ramped up bullish dollar wagers last week by the most since August 2014, to a three-month high of 411,208 net contracts.

Futures indicate a 74 percent chance of the U.S. central bank raising its benchmark rate at its next meeting on Dec. 15-16, data compiled by Bloomberg show. That’s up from 50 percent odds at the end of October. The calculation assumes the effective fed funds rate averages 0.375 percent after the first increase, compared with the current range of zero to 0.25 percent.

Fed Chair Janet Yellen will speak Dec. 2, before a European Central Bank meeting and U.S. payroll report the same week.

“The dollar looks fully priced for the moment and the onus looks to be on U.S. data to support the current level,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. “The risk seems that this correction in the dollar can continue for now.”

The U.S. observes the Thanksgiving holiday Thursday.

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