Politics have foiled the best-laid plans of Wall Street’s currency strategists.
Turmoil
in Turkey as well as strife between Italian leaders and the European
Union have forced dollar bears to throw in the towel on bets that the
rest of the world’s currencies would continue to play catch-up with the
greenback in 2018. A continued flight to safety propelled the Bloomberg
Dollar Spot Index to a 13-month high on Monday.
The
advance prompted TD Securities to close the G10 foreign exchange
convergence trade recommended in its 2018 outlook after losses of more
than 4 per cent. The team targeted 10-per-cent upside in going long the
euro, Swedish krona, and New Zealand dollar relative to the U.S. and
Swiss currencies. In early Tuesday trading, the Bloomberg Dollar Spot
Index eased 0.2 per cent.
“The
soft patch in global growth and the emergence of Italian political
tumult curtailed this thesis even though the ECB signaled the end of QE
this year,” writes Mazen Issa, TD’s senior foreign-exchange strategist.
Read more: Wall Street’s bet on global currencies is bloodied with the U.S. dollar soaring - The Globe and Mail
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