US$-2013-16

2013

The dollar started 2013 weaker against the Euro and stronger against the Yen. However, this appears to be less to do with dollar and more to do with the view that the Yen was overbought and the Euro oversold.  It says relatively little about the dollar itself. This is really a readjustment and not necessarily the start of a trend. Although we can expect more volatility in February – and possibly some further depreciation against some currencies and commodities, I am not sure this will set the tone for the year.

Indeed March will probably show the dollar in a very good light. There is likely to be significant buying and an increase in the value of the currency.

In April and May there is the start of a key time in the dollar exchange.  What is interesting about this is that the relevant element of the currency  is that which is linked to the Renminbi. I see a breakdown in the link between them at this time.

However this is a long term change. There are also some short term influences at play. In April/May there are conflicting signals . There is positive view about the currency, but there are also some restrictions. On balance it looks like the dollar will move one way versus some currencies and the other vs the rest- rather like in January. Look to the individual forecasts for the other currencies to get an idea which way each pair will go.

In June there seems to be more liquidity again. The Fed may be drip feeding a little more into the markets at this time. It doesn’t seem to have a particularly negative impact on valuation that month though.

July sees a bit of drama – with currency trade magnified. August, however looks more tricky. Some of the issues from previous years are reactivated now and the most likely impact is that the dollar will depreciate for a few months.

 This trend continues into November and December. There is more evidence of liquidity during this time and less emphasis on the decoupling of the dollar from the Renminbi etc. However this is not an extremely unstable time. The currency is likely to rise versus the Yen due to the latter’s weakness at this time. It is certainly a time when there will be a defined trend.

 

2014

There is a change in  mood from the beginning of 2014.  At first there is an expansionary period although the Fed might overdo matters.

 

BY Feb-April the picture gets more complex. There is restriction and negative sentiment and a return to the decoupling from the Chinese and possibly other pegs. There could be some quite dramatic movements in this time, not to mention a not wholly positive focus on the Fed leadership.

The key timeframe is later though, in May /June. There is a real challenge due to US debts  and this will mainly be reflected in challenges to the Fed leadership at this time. However there are also some issues triggered by the US population . It is not great for the currency but it is not as negative as some periods over the last few years.

In August, there is another injection of inflationary liquidity but once again this seems to have minimal impact on the valuation of the dollar.

Indeed September is a particularly positive period for the currency – it should appreciate briefly now.

But this is not likely to last as the debt issue remains a problem in October. As  a result there could be a spot of volatility again which will once more require the Fed to be defensive.

The issue of dissolution of pegs comes back under the spotlight  by November. There is an attempt to manage trade in the currency, with a series of interventions by the Fed. However the overall effect seems to be both a devaluation in the currency and an undermining of the Fed at the end of this year.

2015

There is a real focus on fundamentals or lack thereof as 2015 begins. The challenges of the previous months continue and it is possible a low point is reached both in the currency’s value and the Fed reputation

There is some optimism and a feeling of comfort from the population though so the picture is not all bad.

The next few months are a little calmer, although there is still a generally negative sentiment on the currency.  There could be a dramatic change of direction around April/May time too.

June is a time of minor adjustment and not a time to be betting on trends.

 Then in July we return to the themes of the start of the year. Lows, major trading volatility and then some sudden positive uplift.

There is no clear trend over the last few months. The currency looks a positive bet in September but is depressed again by November and December. There is a boost in trade in the currency throughout the winter and spring.

 

2016

In early 2016, there is another period of mixed trends. Against some currencies there is stability until April but in other cases, there is still significant volatility.

Overall there is a sense of not being sure where things are going next.

The picture then becomes very quiet until July, when there is a period of fluctuations and uncertainty about trends again and there may even be a significant amount of trading but without any real direction.

 By November there is another period of divergence, when the dollar is rising vs some currencies and falling verses others. Nevertheless it is not a significantly bad period value wise.

 2017 on the other looks particularly interesting!