After years of global monetary expansion, the US dollar lost its appeal, traders’ search for “new opportunity” began.
After years of global monetary expansion that made long positions in the dollar one of the most popular transactions, traders are taking even the slightest glimmer of economic recovery to reveal the next big story.
Even hints that central bank incentives may no longer be necessary are enough to trigger purchases. The Swedish Krona reached its strongest level against the euro since January last week. The data indicating that the March inflation in Sweden was above the expectations, decreased the expectations for additional incentives and was effective in the increase of the crown. The recovery in oil prices and non-commodity exporters in Canada helped the Canadian dollar to gain the strongest gains among developed market currencies in the past three months. The warning made by the central bank regarding the rate could not prevent the money from appreciating.
Options indicate that the Canadian dollar and Swedish Krona will record the best performance among the major currencies against the dollar next year, after the traditional ports of trust Japan Yen and Swiss Franc. Traders expect inflation to increase in the next 12 months only in the USA and Sweden, among the major currencies.
Athanasios Vamvakidis, G-10 currency strategist at the Merrill Lynch division of Bank of America Corp. in London, said: “We are about to enter a period in which the market’s central bank will start speculating that it will give up expansion. “If there is a large foreign exchange transaction next, it will be due to this transition.”