Dollar Bulls vs. Strategist Bears: Geopolitics Threatens Weak-Dollar Consensus
The US dollar has reached a two-week high as oil prices surge and investors seek safe-haven assets. The Dollar Index rose to around 99.8 on Wednesday, its highest level since mid-August.
However, despite the dollar's strength, currency strategists remain cautious. A Reuters poll found that 34 out of 66 FX strategists believe the greater risk is a weaker dollar, rather than a stronger one.
The strategists' bearish view is not due to expected Fed easing, but rather their doubts about the central bank's ability to tighten as aggressively as markets currently expect. Many point to Federal Reserve Chair Kevin Warsh's hawkish message and the division among policymakers over how much further rates may need to rise if inflation stays elevated.
The stronger dollar has become a concern for risk assets, with Bitcoin falling below $77,000 due to higher yields and Warsh's comments. Nevertheless, some argue that geopolitics could be a major risk factor, with the renewed US-Iran conflict driving oil prices higher and strengthening safe-haven demand for dollars.