• PIMCO, the $1.74 trillion asset management firm, predicts a significant downtrend for the U.S. dollar in 2023.
• Gene Frieda, an executive vice president and global strategist at PIMCO, believes that the USD will continue to lose its appeal as a safe-haven currency of last resort.
• According to Frieda, the dollar’s yield advantage versus other developed economies is likely to narrow over the coming months.
PIMCO Predicts U.S Dollar Will Lose Appeal
Pacific Investment Management Company (PIMCO) expects the U.S. dollar to „continue to lose its appeal as the safe-haven currency of last resort.“ The $1.74 trillion asset management firm added that the USD „is likely to fall further in 2023 as inflation falls, recession risks decline, and other shocks abate.“
Gene Frieda Warns About USD
Gene Frieda, an executive vice president and global strategist at PIMCO, said in a blog post last week: “We expect the USD will continue to lose its appeal as the safe-haven currency of last resort” He noted that some of the shocks were Russia-Ukraine war, spike in energy prices and inflation which buoyed up US Dollar’s value till now but according to him these conditions are likely change this year resulting in falling US Dollar’s value further ahead in future.
Risk Premiums Likely To Decrease
Frieda added: “We believe risk premiums will decline as inflation — and monetary policy volatility decline“ PIMCO believes that „the dollar’s yield advantage versus other developed economies will narrow“ over the coming months .He explained: “Given the faster pace of cumulative rate hikes on the way up, the USD’s yield advantage is likely to fall in early stages of a rate-cutting cycle even if US Dollar sustains its relatively high yield”
The Big Picture
It looks like US Dollar is going through rough patch this year with many analysts predicting a steady decline against other major currencies due to various factors such as lower inflation rates , decreasing recession risks and abating shocks from past years etc . So far it has been serving as a safe haven for investors but growing concerns regarding it’s long term stability have started surfacing lately which may only lead to further depreciation throughout this year .
To sum it up , Pimco has predicted that United States Dollars may go through another slump this year , with weakening demand among investors due to falling yields relative than other major currencies along with decrease in risk premiums &abating shocks from previous years . It remains yet seen if US Dollar would be able sustain it’s position or not amidst all these factors but one thing is sure that it won’t be same again as before
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