U.S. dollar to weaken as BOE and ECB play catch-up with the Fed, but it will remain the world's reserve currency - Invesco's Hooper

- The U.S. dollar has regained some lost ground after its recent drop of nearly 3%; however, the greenback could continue to struggle as interest rate differentials between the Federal Reserve and other major central banks begin to narrow, according to one market strategist.

She said the most significant factor governing the U.S. dollar is the narrowing gap in global monetary policies. The Federal Reserve is expected to raise interest rates by 25 basis points Wednesday, and even if it maintains a hawkish bias, Hooper said that the U.S. is closer to hitting their terminal rate than other central banks like the Bank of England or the European Central Bank.

"With market sentiment more bullish and the VIX volatility index at relatively low levels, there is little demand for a"safe haven" asset such as the US dollar," she said. "The Japanese yen and the euro were both considered major challengers to dollar dominance of the global financial system in the 1980s and the 2000s, respectively, but it never came to fruition," Hooper said."Having said that, today, de-dollarization is about geopolitics and sovereignty, not macro/financial competition.

Source: Loan Digest (loandigest.net)

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