BGI predicts dollar will rally
The dollar could experience a surprise boost in the near future if predictions from Barclays Global Investors (BGI) come true.
In the company's outlook published yesterday, Haydn Davies, chief economist of BGI, said that despite signs portraying a slowdown in the US economy, the rise in inflation might lead to the Federal Reserve deciding not to end its series of interest rate hikes, Reuters reports.
Commentators have put the US dollar's good performance against other world currencies down to the cycle of interest rate hikes which have brought it up to 5.0 per cent.
Davies told Reuters: "Markets may have been a little premature in anticipating an end to the cycle.
"With the [dollar] still enjoying a substantial yield premium over other currencies, [it] does not look nearly as wounded as the doomsayers portend and appears well place to stage a rally."
Going forward, BGI also predicts that European equities will once again start to outperform other currencies in the world.