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Emerging Markets

Experts offer mixed views on US dollar rally

Currency analysts disagree over whether the recent US dollar rally will continue. Mitul Kotecha of Calyon believes it will be resilient, while David Mann of StanChart thinks a sustained bounce will only come early next year.

  • 10 Dec 2009
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There is clear disagreement among currency analysts over whether the recent rally in the US dollar will continue to steam ahead.

The dollar began to turn around at the beginning of December, spurred on in recent trading days from growing risk aversion.

Investors have become spooked by Standard & Poor’s putting Spain on negative credit watch and by Fitch Ratings’ downgrade of Greece’s long-term debt ratings to BBB+, from A-.

Since December 3, the US dollar index – which measures the dollar against a basket of six currencies – has climbed 1.91%, as of 5pm Hong Kong time on December 10.

But analysts are divided over the sustainability of the recent rally. Some, like Mitul Kotecha, head of global FX strategy at Calyon in Hong Kong, believe that the dollar will be resilient going into the end of the year.

“There is certainly a lot of short covering, and also risk aversion is creeping back into the market,” he noted. “It’s difficult to see a bounce in risk appetite in the coming weeks.”

However, there is another camp which argues that this rally could splutter out very quickly.

“Our key view is that we’ve already seen a fair amount of profit-taking on some of the short dollar positions,” said David Mann, senior FX strategist at Standard Chartered. “People have gotten a bit overexcited about the strong US job markets data.”

Markets cheered when the November jobs report, issued on December 3, found that US employers shed just 11,000 jobs and unemployment fell to 10%, from 10.2%.

Mann thinks that a sustained US dollar bounce will come only in the first quarter of next year. “The US dollar has gone down in the fourth quarter in seven of the last nine years,” he notes.

“Seasonal factors actually favour a weaker dollar in the fourth quarter and a bit of a bounce in the first quarter. We’re due for a decent dollar bounce and we have that penciled in for the first quarter. It’ll be an opportunity to sell the dollar at that stage.”

That could be spurred by slightly worse-than-expected data or when markets start to price in weaker growth than expected in 2010. “The dollar is a counter cyclical currency and those worries about a slowdown could trigger a dollar bounce,” said Mann.

But by Kotecha’s estimates, the US dollar could weaken in the first half of 2010 and recover in the months after that. “We should still see some improvement in risk appetite in the first few months and that will continue to play negatively for the dollar.”

  • 10 Dec 2009

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
1 Citi 17,937.65 77 10.67%
2 HSBC 17,202.71 88 10.24%
3 JPMorgan 15,720.00 64 9.35%
4 Deutsche Bank 13,208.40 58 7.86%
5 Bank of America Merrill Lynch 10,749.43 54 6.40%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
1 HSBC 6,221.38 14 11.59%
2 JPMorgan 5,140.67 18 9.58%
3 Bank of America Merrill Lynch 4,497.27 18 8.38%
4 Deutsche Bank 4,264.56 14 7.95%
5 Credit Suisse 4,132.73 8 7.70%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
1 Citi 6,674.27 20 14.95%
2 JPMorgan 5,884.96 16 13.18%
3 Barclays 4,728.57 10 10.59%
4 Deutsche Bank 4,044.06 10 9.06%
5 Goldman Sachs 3,229.17 5 7.23%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
1 Goldman Sachs 182.99 41 13.58%
2 Bank of America Merrill Lynch 90.70 28 6.73%
3 JPMorgan 88.18 43 6.54%
4 Deutsche Bank 85.13 29 6.32%
5 Lazard 80.06 43 5.94%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
1 ING 382.49 5 8.60%
2 Commerzbank Group 292.65 4 6.58%
3 UniCredit 275.33 3 6.19%
4 SG Corporate & Investment Banking 271.81 3 6.11%
5 Raiffeisen Bank International AG 207.65 3 4.67%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
1 Standard Chartered Bank 1,072.16 12 9.37%
2 Deutsche Bank 1,008.26 15 8.82%
3 AXIS Bank 1,000.88 27 8.75%
4 Barclays 699.87 9 6.12%
5 Trust Investment Advisors 698.72 32 6.11%