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Main » 2018 » May » 21 » Fundamental Analysis 5/21/2018: A strong dollar affects not only SHARES
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Fundamental Analysis 5/21/2018: A strong dollar affects not only SHARES

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After the troubled start of the year, the dollar finally feels good. The US currency gaining strength every day and investors wondering how it will affect their current portfolios.


The dollar index rose 0.23% to reach 93.76 at time of writing. The most famous of the world currency began its recovery in mid-April, after reaching record lows.

 

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What influences on the dollar?

 

  • Of course, the simple answer to this question in there, but let's simplify as much as possible. At a fundamental level, one can note a few points:
  • US-China trade talks in order to find mutually beneficial conditions
  • The meeting of the presidents of the United States and North Korea on nuclear disarmament Peninsula
  • Prospects for sanctions against Iran (and the potential response)
  • Growth yield decadal treasury bonds (greater than 3%)
  • Low demand for safe-haven assets (gold, yen, euro)
  • The plan of the Fed to raise interest rates at least twice this year

 

And while the dollar rose 3.9% from the beginning of April, two major Wall Street index fell by almost 0.3% (Dow Jones + 2.5%; Nasdaq -0.38%; S & P500 -2.6%).


In this regard, the chief strategist at Bank Wealth Management, Sunway Terry, said that "the rising dollar is one of the factors that can slow down the pace of earnings growth."


In other words, investors are worried not only that the market indices are under pressure because of the strong dollar, but also that it can have a negative effect on the financial report for the second quarter.


Where the dollar is moving?


The yield on Treasury bonds was last week above the psychological level of 3%, reaching a seven-year highs, which strengthened the position of the dollar. To be honest, there is nothing to indicate a reversal in bond prices in the near future.


There is also the possibility that the Fed will continue the process of monetary normalization by raising interest rates several times this year. The combination of these two factors is sufficient to predict the continuation of the upward movement.

 

 

Based on materials FFS

 

 

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