Dollar should be well supported all year
July 1 (Reuters) -The dollar should be well supported all year thanks to the lure of the highest interest rate among major currencies.
Coupled with the safety the dollar offers those invested in it, it's hard to imagine anyone straying too far from the U.S. currency at a time when its strength versus a growing number of emerging currencies may be reaching a crisis point.
There is little risk of a drop like that seen in 2022 which happened when investment in the dollar become overcrowded. Although demand for dollars has grown, there are no reports of a similar situation, and traders remain short versus a number of other high-yield currencies like Mexico's peso, New Zealand dollar and the British pound.
The penchant for carry trades reflected by these dollar short positions has been supported by huge rises for equities that will continue to underpin the dollar too.
Very little change is expected for the U.S. interest rate this year and it is expected to be around 4.5 percent at the end of 2025 when it may still be the highest yielding major currency.
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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