HSBC Asset’s Little Sees Weaker Dollar on Shift in Data Reaction

HSBC Asset Management expects the dollar to weaken, arguing that its limited gains despite favorable macro conditions may point to a structural downtrend once energy shocks and geopolitical tensions fade.

The fund manager, which oversees $863 billion, said the greenback’s strength has been muted so far this year. The dollar’s failure to rally decisively despite strong domestic growth and increased geopolitical tensions could leave it vulnerable as valuations are elevated, according to Joe Little , the firm’s global chief strategist.

“Something has changed because historically that set of preconditions would’ve created a much, much stronger trend in the dollar,” Little said in an interview. “So I don’t think the broad environment has changed that much from the type of dynamics we saw last year where the dollar was tending to trade on a weaker footing as the trend.”

A weaker greenback is seen as a key tailwind for emerging markets, easing financial conditions and drawing capital into higher-yielding assets. The fund manager expects developing-nation currencies and local markets to benefit, particularly as many remain undervalued against the dollar.

The climbed 0.6% last month, recouping some of its earlier losses as resilient US economic data and quickening price pressures fuel bets that the Federal Reserve’s next move may be an interest-rate hike.