Photographer: Drew Angerer/Bloomberg

Top 10 Forecaster Macquarie Turns Short-Term Dollar Bear on Fed

  • Fed dovishness set to support commodity currencies: Macquarie
  • Dollar to weaken to 80 cents versus Aussie in 3 months: report

Macquarie Bank Ltd., one of the world’s top 10 currency forecasters, reversed its three-month projection for the dollar after the Federal Reserve pared back expectations for interest-rate increases this year.

The Fed’s “more dovish-than-expected” stance will support the currencies of emerging-market economies and commodity-exporting nations, Macquarie strategists Nizam Idris, Gareth Berry and Teresa Lam wrote in a report Thursday. The South Korean won, Malaysian ringgit, Australian dollar, Indonesian rupiah and Indian rupee are set to be “the main short term beneficiaries,” according to the report.

“We revise our FX view to now reflect a weaker big dollar view in the one-to-three month horizon, before the dollar could regain strength on a resumption of Fed rates normalization process and likely further easing from other major central banks later this year,” the Singapore-based analysts wrote.

The Sydney-based bank expects the U.S. currency to weaken to 80 U.S. cents against the Aussie in the next three months, a level last seen in May. The greenback will recover to 74 cents in six months as the Reserve Bank of Australia is set to call for a lower currency and subsequently cut rates, according to the report. Australia’s dollar surged as much as 1.2 percent to 76.43 cents, an eight-month high, on Thursday.

Emerging-Market Currencies

The U.S. currency is set to weaken to 1,120 won, 3.90 ringgit, 12,600 rupiah and 64 rupees in the next three months, the analysts wrote. Macquarie was ninth in Bloomberg’s overall currency forecast rankings for the four quarters ending Dec. 31, and was the second-most accurate for emerging Asia calls.

Macquarie expects the dollar to trade at 112 yen in three months before rising to 118 in September, from 111.80 as of 7:49 a.m. in London Thursday. Against the euro, the greenback is set to fall to $1.15 in June before rebounding to $1.11, from $1.1245, according to the bank.

The Federal Open Market Committee on Wednesday kept the target range for the benchmark federal funds rate at 0.25 percent to 0.5 percent. The median of policy makers’ updated quarterly projections, known as the dots, saw the rate at 0.875 percent at the end of 2016, compared with the 1.375 percent level forecast in December. Officials cited the potential impact from weaker global growth and financial-market turmoil on the U.S. economy in a statement at the conclusion of their two-day meeting.

“The move has subtly shifted the pressure for more monetary easing onto the shoulders of other major central banks as the dollar weakens,” the Macquarie analysts wrote.

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