Pacific Investment Management Company (PIMCO) expects the US dollar to “continue to lose its appeal as a safe haven currency of last resort.” The $1.74 trillion asset management firm added that the dollar “is likely to fall further in 2023 as inflation falls, recession risks ease and other shocks abate.”
PIMCO Strategist Warns on USD
Pacific Investment Management Company (PIMCO) has forecast a significant downward trend for the US dollar this year. PIMCO had $1.74 trillion in assets under management as of December 31, 2022.
Gene Frieda, executive vice president and global strategist at PIMCO, said in a blog post last week:
We expect the USD to continue to lose its appeal as a safe haven of last resort.
“We believe that risk premiums will decline as inflation and monetary policy volatility subside. Further shocks are clearly a risk, but the USD risk premium (and cross-asset volatility) remains substantial, in our view,” added Frieda.
“While higher yields clearly worked in favor of the dollar last year, any forward-looking view must also take into account how the dollar was boosted by the 2022 shocks,” the strategist explained, and “how far they may decline in 2023”. .” He pointed out that some of the impacts were the war between Russia and Ukraine, the increase in energy prices and inflation.
The executive detailed:
PIMCO believes the dollar, which has depreciated since hitting a 20-year high last September, is likely to fall further in 2023 as inflation subsides, recession risks abate and other shocks abate.
PIMCO believes that “the yield advantage of the dollar against other developed economies will narrow” in the coming months, Frieda said. “Given the faster pace of cumulative rate hikes en route to the upside, the USD’s yield advantage is likely to wane in the early stages of a rate-cutting cycle, even if the USD maintains its relatively high yield.” .
Do you agree with the PIMCO strategist that the US dollar is losing its appeal as a safe haven of last resort? Let us know in the comments section.
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