The dollar is defying predictions it would lose its currency crown in 2019.
A gauge of the greenback is headed toward the highest level this year, with most major currencies having lost ground against it.
The euro, which was expected to strengthen in 2019, is struggling as the region’s economy fails to sustain signs of a recovery, while Australia’s dollar is falling on expectations the country’s central bank will cut rates.
The greenback was labelled King Dollar in 2018 as it resumed a multi-year rally, though many analysts expected that not to last as the Federal Reserve rowed back on plans to continue its rate-hiking cycle. Yet other central banks are looking even more cautious, with the European Central Bank planning more stimulus to add to crisis-era negative rates.
“The US seems almost like an oasis,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt. “The impression increasingly arises that the US economy is decoupled from the rest of the world, certainly from the European economy.”
The latest impetus came from Australian inflation data missing forecasts yesterday and an unexpected drop in German business confidence, which sent the euro below $1.12 and the Bloomberg Dollar Spot Index to a seven-week high. The dollar has also been boosted by news that US and China negotiators plan to have a draft trade agreement by the end of next month.
Trader bets on the euro gaining are falling out of fashion in the options market, while demand for protection from a further slide in the Australian dollar has risen. Still, currency analysts remain sceptical on the dollar rally’s prospects.
“It seems to be less about dollar strength and more about currency weakness elsewhere,” said Ned Rumpeltin, the European head of currency strategy at Toronto-Dominion Bank in London. “The dollar is good enough but we don’t think it offers a particularly compelling bullish case on its own merits.
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