Analysis-US exceptionalism thwarts dollar bears but Fed test looms
By Saqib Iqbal Ahmed
NEW YORK (Reuters) — Resilient U.S. growth is fueling another rebound in the dollar and sending bearish investors scrambling, though the rally will be tested by a gauntlet of data and the Federal Reserve's meeting later this month.
The U.S. dollar index, which measures the currency against a basket of its peers, has surged 5% since late July and stands at its highest level in around half a year. The greenback's gains have pressured the currencies of the world's biggest economies, sending China's yuan to its lowest since December 2007 and spurring expectations for the Japanese government to intervene and prop up the battered yen.
Many market participants had expected the U.S. economy to soften this year under the weight of the Fed's rate increases, pushing the dollar lower.
While the dollar faltered over the summer, growth has wobbled in many of the world's major economies while remaining comparatively robust in the United States. That has supported the idea that the Fed will leave rates at around current levels for longer than previously expected and boosted the relative attractiveness of the greenback.
Signs that the dollar will continue enjoying its yield-advantage over other currencies have undercut support for bearish views on the greenback. Speculators' net short bets on the dollar shrank to $7.17 billion last week, from a two-year high of $21.28 billion in late July, data from the Commodity Futures Trading Commission showed.
«It's really just the strength of the U.S. economy, relative to the rest of the world,» said Vassili Serebriakov, foreign exchange and macro strategist at UBS. «Markets have really come back to the theme of U.S. exceptionalism.»
That theme will be tested in September, as
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