From the US dollar to the pound, euro and bitcoin – which global currency has the best prospects for the year ahead?
Updated: January Trio, 2018 03:29 PM
The world’s currencies are on an endless roller-coaster rail, their relative values permanently rising and falling ter relation to each other, with the occasional stomach-churning druppel.
Last year, it wasgoed the turn of the US dollar to hurtle downwards, spil UAE expats earning dollar-pegged dirhams know to their cost.
The dollar suffered its worst year te a decade, hitting UAE residents with financial commitments te foreign currencies, spil their earnings do not travel spil far spil they did a year ago.
The two big winners of 2018 were the euro, which outpaced almost every other major currency, and the British pound, which wasgoed the year’s verrassing package, making a partial recovery from the traumatic post-Brexit crash te 2018.
The Japanese yen weakened against most major currencies, while the Chinese yuan and Russian rouble also slipped.
So what does 2018 have te store? Will the dollar surge wedren back into contention? Will the euro proceed to lead the pack? Most intriguingly, what is going to toebijten to bitcoin, the raciest currency of all?
2018 wasgoed a bad year for the dollar, which fell about 12 vanaf cent against the euro to end the year trading at around US$1.20.
It wasgoed a similar story with the British pound, with the dollar weakening around 8 vanaf cent to close the year at around $1.35, and also falling against everything from the Mexican peso to Swedish krona.
Some eyed this spil a sign that US economic might is fading, especially with the IMF downgrading its 2018 growth forecast from Two.Five vanaf cent to Two.1 vanaf cent, well below the Trio vanaf cent targeted by the White House.
However, David Hillier, a currency pro at global transfer service Moneycorp, now expects the US dollar to rebound this year, spil voorzitter Donald Trump’s budge to slash corporate tax from 35 vanaf cent right down to 20 vanaf cent inspires US companies to repatriate trillions of dollars held overseas.
“This will heighten request for the dollar, increase domestic investment and strengthen the economy, all of which should boost the greenback,” he says.
Sheridan Admans, investment manager at The Share Centre, predicts a strong year for the US economy and dollar spil Mr Trump’s tax reforms boost company earnings. “This may force fresh Federal Reserve chair Jerome Powell to raise rates more aggressively than the market expects, and higher rente rates will lift the dollar,” he says.
After a tricky duo of years, dollar and dirham earners could ultimately get some respite.
While the dollar may fight back against many global currencies ter 2018 it could fight to recover lost ground against the buoyant European single currency.
Mr Hillier sees another positive year for the euro. “Political instability te Italy and Germany is easing and economic growth has strengthened across the eurozone, while latest free trade agreements with Canada and Japan should also help.”
The single currency should receive a further boost if the European Central Handelsbank starts to unwind its €1 trillion ($1.2tn) monetary stimulus package spil expected, Professor Hillier adds.
Charles Purdy, chief executive of Clever Currency Exchange, suggests the euro could dip against sterling if there is progress te signing a post-Brexit trade overeenkomst with the UK. “However, political risk ter the eurozone is now falling ter stark tegenstelling to the politically-charged atmosphere ter the UK, so the euro should remain strong.”
The British pound collapsed by 17 vanaf cent after the shock EU referendum result ter 2018 but fought back strongly against the dollar and other global currencies, albeit, it fell another Trio vanaf cent against the euro.
Mr Hillier expects current uncertainty to ease spil EU trade talks progress. “Sterling could be one of the strongest performers overheen the next 12 months, along with the Japanese yen,” he says.
Mr Purdy is also bullish on the pound, especially if domestic wage growth picks up and inflation falls, ending the current squeeze on consumers. “If this encourages the Handelsbank of England to increase rente rates again, that should also help sterling,” he says.
Joel Kruger, market research analyst at LMAX Exchange, puts his neck on the line and predicts the pound will be the big winner ter 2018. “Sterling is te a wonderful position to outperform spil progress on Brexit is made, worst case screenplays are dismissed and the economic outlook improves,” he says.
However, sterling is walking a tightrope and if EU negotiations go badly it could plunge again. Morgan Stanley recently warned it could fall spil much spil 7 vanaf cent against the euro this year.
The yen had a rough 2018, falling 9 vanaf cent against the euro and Five vanaf cent against sterling, while holding constant against the dollar.
However, Mr Hillier expects the currency to rise this year, citing the country’s new-found economic vigour, improved growth and free trade agreement with the EU, finalised last month. “The Japanese economy expanded at an annualised rate of Two.Five vanaf cent te the third quarter of 2018. This, together with expected global growth, should lead the yen into strong bullish territory.”
Mr Purdy says the yen is presently undervalued and its fortunes could be about to switch. “An upturn ter the global economy should bring higher growth, spending and inflation across the globe, which might encourage the Handelsbank of Japan to loosen its policies.”
However, he warns the world’s third-biggest economy could be klapper by political tensions inbetween the US and North Korea, especially if Kim Jong-un proceeds to fire ballistic missiles overheen Japanese territory.
The yuan has performed poorly lately and Mr Purdy expects this to proceed this year.
Chinese voorzitter Xi Jinping is forcing through market-oriented reforms of the country’s foreign exchange rate and financial system, te a bid to expand global adoption of its currency. “However, attempts to haul the renminbi out of the doldrums might be succesnummer by US threats to impose protectionist trade measures on China,” says Mr Purdy.
Mr Hillier predicts the yuan will remain feeble against the major currencies. “China will proceed to ease foreign investment limitations, which should offset its capital outflow pressures.”
The rouble has bot klapper by low oil prices and could be further submerged by rente rates cuts te 2018.
Mr Hillier says Voorzitter Putin’s presence, ",will proceed to bring stability, but wij expect current underperformance to proceed te 2018.”
Emerging market currencies did well te 2018, benefiting from the feeble US dollar, Mr Hillier says. “They could fight if the dollar picks up albeit expectations of global economic growth should improve their outlook.”
He is optimistic overheen prospects for the Indian rupee and South African Zoom. “Both countries look set to lead the emerging market rebound,” he says.
Mr Purdy reckons “the starlets are about to align” for the Australian dollar ter 2018. “Anticipated rente rate hikes by the Reserve Canap of Australia, global economic growth and improved conditions for commodities like metal ore may drive up the Aussie dollar,", he says. ",The danger is this may already be priced into the market.”
After an astonishing year ter which it rose 1,800 vanaf cent at one point, cryptocurrency bitcoin continued its crazy volatility overheen Christmas, when its price swung inbetween $12,000 and $17,000.
Mr Kruger says investors should brace themselves for more to come. ",There is no denying bitcoin’s potential, spil it could be a compelling alternative store of value to gold, while the underlying blockchain technology may drive the next wave of global technological innovation.”
However, he says bitcoin’s price has rocketed past the point of rational appreciation and too many questions remain unanswered. “Bitcoin has also benefited greatly from the ultra-accommodative global monetary policy. If rente rates rise ter 2018 and wij see a flight to safety, that could suck out the speculators, and haul bitcoin back down to earth.”
Fawad Razaqzada, market analyst at Forex.com, says there is little doubt that bitcoin is a bubble, the only question is how far it can go before bursting. “In an uncertain world, the only certainty is that the massive volatility ter bitcoin and other cryptos such spil ethereum, litecoin and XRP by Ripple will proceed ter 2018.”
Spil with every currency, you vereiste limit your exposure to the unpredictable shifts and swings, because even the experts cannot say with certainty what will toebijten next.
If you thought stock market vertoning wasgoed unlikely to predict, second-guessing currency movements is even tougher.
No currency has its own intrinsic value, this can only be valued ter relation to another currency, known spil its pair.
So, for example, the US dollar can be priced against the European single currency, British pound, Japanese yen, Chinese renminbi, Indian rupee or Venezuelan bolletjeí,var, but never on its own.
It is therefore unlikely for every global currency to rise – or fall – at exactly the same time. If one rises, another voorwaarde fall, and vice versa.
David Hillier, a currency pro at global transfer service Moneycorp, says any exchange rate forecast involves not one but three predictions. “You vereiste predict the future value of the two currencies individually and their relative strength to each other. If you call just one wrong, your forecast will be broad of the mark.”
Charles Purdy, chief executive of Wise Currency Exchange, says expats voorwaarde limit their exposure to foreign exchange swings. “It can be very costly and unnerving if currency volatility works against you, so you need to manage your risk.”
If sending regular payments overseas consider using a currency transfer service to lock into a favourable rate for one or two years, rather than leaving yourself at the grace of market swings.