REUTERS
After three straight years of gains, strategists are forecasting the U.S. currency will be a world beater again in 2016, strengthening against seven of 10 developed-world peers by the end of the year, according to the median estimate in a Bloomberg survey.
That outlook is backed by the Federal Reserve’s stated intent to continue raising interest rates while peers in the rest of the world keep them flat or lower, Bloomberg reported.
The rally that started during President Barack Obama’s second term is poised to join a category defined by only the biggest, most durable periods of dollar strength since the currency’s peg to gold ended in 1971.
The U.S. currency will end 2016 higher against its major counterparts except the Canadian dollar, British pound and the Norwegian krone, posting its biggest gains against the New Zealand and Australian dollars and the Swiss franc, according to forecasts compiled by Bloomberg.
The only other two comparable dollar rallies were in the 1980s and the 1990s.
Read alsoFederal Reserve raises key interest rate, first time since 2006The current rally kicked off in 2013 when the Fed began winding down the extraordinary monetary stimulus it had in place since the 2007-2009 recession, stoking speculation higher interest rates would follow. That causes the currency to strengthen because it means investors would be paid more to keep money in dollars compared with others.
Last month, those higher rates finally came as the Fed bumped up borrowing costs a quarter of a percentage point for the first time in almost a decade, and released forecasts implying four similar increases next year as economic growth continues.