Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

The recent surge in the U.S. dollar will last less than three months, according to a majority of foreign exchange strategists polled by Reuters who said the greenback would have a roller-coaster ride in the run-up to the U.S. presidential election.

In September, the dollar rose more than 2 per cent – its best monthly performance this year. But the greenback is still down more than 3 per cent in 2020, a loss which was not expected to be recouped over the coming year, according to the Reuters poll of around 80 strategists taken between Sept. 28 and Oct. 5.

While last week’s ill-tempered debate between U.S. President Donald Trump and Democratic challenger Joe Biden reinforced concerns the outcome of the Nov. 3 presidential election could be questioned and boosted the greenback, hopes for U.S. stimulus have had markets in the mood for riskier bets.

Story continues below advertisement

The expected pull and push in the currency market in the lead-up to the election was underscored by the wide range of forecasts in the one-month-ahead predictions compared to the previous month.

While Mr. Trump’s positive test for COVID-19 and data on U.S. currency futures positions point to upside potential in the dollar’s recovery, nearly three-quarters of analysts, 54 of 75, in response to an additional question said the greenback’s recent surge would last less than three months.

That included 13 respondents who said the dollar’s run-up was already over, while the remaining 21 predicted it to run for over three months.

“The outlook for the next month or so is messy to be honest, because of the U.S. election... but the dollar will benefit from the ongoing political uncertainty in the next few weeks,” said Kit Juckes, head of FX strategy at Societe Generale.

That expected volatility was also highlighted in the median responses to additional questions, which showed the dollar could rise around 2 per cent, or conversely fall by as much, in the run-up to the election.

But beyond the near term, strategists remained skeptical about the dollar’s strength as the U.S. Federal Reserve’s aggressive easing has wiped out the yield advantage of dollar-denominated assets.

That was reflected in predictions over the coming year for the euro. Having lost about 2 per cent in September against the dollar, it forecast to trade about where it was on Monday – around US$1.18 – in three months, and then rise over 2.5 per cent to US$1.21 in a year.

Story continues below advertisement

Still, the greenback’s appeal as a safe-haven asset and demand for it as a reserve currency from global investors, governments and central banks for portfolio rebalancing and fund transfers was expected to limit the weakening.

“The dollar is a safe haven because of its intrinsic qualities and its liquidity – as there’s so much debt around the world issued in dollars and because so many business invoices are drawn up in dollars on a day-to-day basis,” said Jane Foley, head of FX strategy at Rabobank.

“There have been investors wondering if their short dollar positions were sensible in the current environment. And you’ve just seen some short-covering of dollars certainly.”

Other currencies such as the Japanese yen and the Swiss franc, which are widely considered as safe bets, have gained this year against the dollar.

That trend was predicted to be in play in the near term.

Against currencies associated with higher risk such as the Australian and Canadian dollars, the greenback has slid and that trend was predicted to hold true provided an expected economic recovery from the coronavirus crisis improves the outlook for commodity prices.

Story continues below advertisement

Indeed, after gaining more than 2 per cent this year so far, the Aussie dollar was forecast to gain another 3 per cent over the next 12 months. The New Zealand dollar and the Canadian dollar, nursing losses of over 1 per cent and 2 per cent respectively, were forecast to gain nearly 4 per cent and 2 per cent.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies