- Macquarie Group’s Gareth Berry advised CNBC on Friday: “The U.S. greenback was meant to be a safe-haven foreign money … However we’ve had episodes previously the place the greenback has weakened round political occasions within the U.S. … It is uncommon however occurs on occasion.”
- Berry cited two earlier events the place this occurred — throughout the 2011 debt ceiling disaster within the U.S. in addition to the 2016 election.
- The Japanese yen and euro may function key options to the greenback, Berry mentioned.
The greenback will see weak spot going into the U.S. elections in November, predicted Macquarie’s overseas alternate strategist, who says he’s bearish on the foreign money.
“We’re fairly bearish on the U.S. greenback, not massively so … however we do see scope for broad-based U.S. greenback weak spot into the U.S. presidential elections in November,” mentioned Gareth Berry, who can also be Macquarie Group’s managing director.
A recent CNBC/Change Research poll found that former Vice President Joe Biden is main over President Donald Trump in six swing states. Voters gave Trump low marks on his dealing with of the coronavirus. Throughout the six states, a majority of voters approve of how Trump is dealing with just one subject: the inventory market.
Berry advised CNBC on Friday: “The U.S. greenback was meant to be a safe-haven foreign money … However we’ve had episodes previously the place the greenback has weakened round political occasions within the U.S. … It is uncommon however occurs on occasion.”
Berry listed two events when that occurred — throughout the 2011 debt ceiling disaster within the U.S., in addition to the 2016 election.
In 2011, Congress could not agree on a deal to raise the debt ceiling till it appeared to develop into instantly vital. That led Commonplace & Poor’s to downgrade the credit standing of the US for the primary time, and generated appreciable market volatility.
The U.S. greenback index, which tracks the dollar towards a basket of its friends, was round 96.250 throughout Friday afternoon Asian buying and selling hours, declining from ranges above 96.four earlier within the week.
Yen, euro as key options
The Japanese yen in addition to the euro may function key options to the greenback, Berry mentioned, including that he sees the yen strengthening to ranges of 102 towards the greenback by November. The yen was final buying and selling at 107.23 per greenback on Friday afternoon.
The draw back to the yen story is that the pension fund business in Japan has been diversifying out of the yen “fairly aggressively” into different currencies, resulting in a “tide of outflows” of the yen, he mentioned.
Nonetheless, Berry mentioned: “However I believe there’s nonetheless sufficient mileage on this U.S. political story, to permit dollar-yen to fall fairly sharply into November, and that might be, together with the euro, certainly one of our prime picks as greenback options over the subsequent few months.”
— CNBC’s Jacob Pramuk contributed to this report.
Video: Japanese yen and euro are prime options to the greenback, says Macquarie (CNBC)
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