King dollar to extend its dominance in 2022 as Fed gears up for rate hikes – Reuters poll

King dollar is expected to reign supreme across the fx board in 2022 as well, thanks to the monetary policy normalization by the US Federal Reserve (Fed), according to the 49 foreign exchange strategists polled by Reuters between January 4-6.

Key findings

Nearly two-thirds of the respondents said “interest rate differentials would dictate sentiment in major FX markets in the near term, with only two concerned about new coronavirus variants.”

“Volatility in FX markets would increase over the coming three months, with well above 80% saying so for both majors and EM currencies.”

“Among the emerging currencies polled on, the tightly-controlled Chinese yuan was predicted to depreciate nearly 2% to 6.5 per dollar in a year.”

“The Philippine peso, Malaysian ringgit and Indian rupee were also expected to weaken about 1% or at best cling to a range.”

“Turkey's battered lira was forecast to drop another 14% this year after plunging 44%.”

“South Africa's rand is set to remain rangebound in the next six months but fall 0.4% to 15.78/$ in a year.”

“The euro, which lost nearly 7% last year was forecast to gain a little under 1.5% by end 2022.”

“Among major safe-haven currencies, the Japanese yen was expected to trade around current levels and the Swiss franc to drop around 3% in a year. “