Dollar’s losses may just be getting started

Bloomberg

The dollar had an awful December and things may only get worse.
That’s the view of a growing number of fund managers and strategists including those at M&G Investments Ltd, Brandywine Global Investment Management and ABN Amro Bank NV. A truce in the US-China trade war, improving global growth and a shrinking yield premium on US Treasuries will undermine the currency, they said.
“We expect to see better growth in the rest of the world ex-USA,” said Jack McIntyre, a portfolio manager at Brandywine Global Investment Management in Philadelphia. “The primary driver of dollar weakness will be a shift in relative economic growth rates between the US and the rest of the world.”
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 global peers, slid 2% in December, the biggest monthly decline in almost two years. The gauge’s failure to sustain gains made earlier in 2019 may have drawn a line under a rally that saw it surge about 40% from a low in 2011 to a peak in early 2017.
The dollar started to fall from October as Washington and Beijing closed in on an initial deal to end their trade dispute. The agreement was confirmed by US president Donald Trump in December. Hedge funds and other speculative investors flipped to a net short position on the greenback for the first time since June 2018 following the news, according to data from the Commodity Futures Trading Commission.