Macquarie Bank goes bearish on dollar, EM currencies stand to gain

Macquarie Bank, one of the world’s top 10 currency forecasters, reversed its threemonth projection for the dollar after the Federal Reserve pared back expectations for interest-rate increases this year. The Fed’s “more dovishthan-expected” stance will support the currencies of emerging-market economies and commodity-exporting nations, Macquarie strategists Nizam Idris, Gareth Berry and Teresa Lam wrote in a report on Thursday. The South Korean won, Malaysian ringgit, Australian dollar, Indonesian rupiah and Indian rupee are set to be “the main short-term beneficiaries,” according to the report.

“We revise our FX view to now reflect a weaker big dollar view in the one-tothree month horizon, before the dollar could regain strength on a resumption of Fed rates normalisation process and likely further easing from other major central banks later this year,” the Singaporebased analysts wrote.

The US currency is set to weaken to 1,120 won, 3.90 ringgit, 12,600 rupiah and 64 rupees in the next three months, the analysts wrote. Macquarie expects the dollar to trade at 112 yen in three months before rising to 118 in September, from 111.80 at 7:49 am on Thursday.