Rising Rates Become Enemy No. 1 for Traders Betting on Dollar
- Greenback’s brief gains mostly driven by crisis, haven demand
- Yield curve suggests possible economic slowdown, weaker dollar
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The Federal Reserve’s campaign to hike rates is turning out to be enemy No. 1 for the U.S. dollar -- upending Wall Street consensus heading into this year.
While conventional logic suggests rising yields should buoy the greenback, traders are now betting the Fed’s policy tightening will crimp economic growth down the road. Demand for dollar call-options has plummeted to the lowest in nine months with the currency erasing its year-to-date gains. That’s the putting dollar bulls at Morgan Stanley, Bank of America Corp. and Citigroup Inc. on the defensive.