What’s In Store For The Dollar

Bullish:

• $EM - Optimistic outlook for emerging market assets due to expected benefits from vaccine development and economic recovery.

  • “Many emerging market countries have struggled with pre vaccine virus control, so they will benefit disproportionately from vaccine development. That's one of the reasons why we're relatively encouraged on the outlook for EM assets.”

    Zach·5:05
• $CNY - Potential strength of the Chinese yuan against the dollar, especially in scenarios of vaccine delay.

  • “A long vaccine delay would likely support the dollar versus a variety of emerging market currencies, but it could result in dollar weakness versus some other crosses, including the Chinese yuan and other Asian currencies, which have controlled the virus well so far.”

    Zach·5:43
• $RMB - Potential for RMB internationalization through China's Cross-Border Interbank Payment System (CIPS), which could enhance efficiency and potentially bypass SWIFT.

  • “The cross border interbank payment system or CIPS that has the ability not just to increase the efficiency of domestic payments, but also provides a pathway to be linked up with international payment systems. And more importantly, the CIPS can also be used as a messaging system because it has the capabilities to transmit messages related to financial transactions in the way that SWIFT currently does, but in a way that ultimately could potentially bypass SWIFT.”

    Eswar·27:57

Bearish:

• $USD - Expectation of a prolonged period of dollar depreciation due to overvaluation and negative real interest rates.

  • “We think that the dollar has entered a period of trend depreciation that's likely to last a few quarters, maybe even a couple of years.”

    Zach·2:46