JPMorgan issued a statement that the US dollar will lose ground this year as the Federal Reserve maintains record low interest rates to stimulate spending. The statement also suggested the deficit and further quantitative easing will also push the dollar lower. As a result, the US dollar is likely to grow in use as the means to fund carry trades where the dollar is sold to buy a higher yielding currency.
“U.S. growth alone cannot support the dollar as it’s highly unlikely that the Fed will be lifting interest rates in the next 12 months,†said John Normand, the London-based head of currency strategy at JPMorgan. “Few people will be buying the dollar as an investment vehicle. Many people will continue to use the dollar as a funding currency.â€
Source: Bloomberg
