Dollar gains limited in 2016, fund managers look elsewhere

Dec 29, 2015 (LBO) – US Dollar gains are expected to be limited next year compared with the strengthening seen over the last two years after a well-expected tightening of interest rates by the US Fed this month.

The dollar rallied 10 percent to 1.09 per euro this year from 1.2 per euro at the beginning of the year. This is a gain from 1.35 per euro at the beginning of 2014.

The currency will appreciate about 5 percent to 1.05 per euro by the third quarter of 2016 due to the well-expected Fed liftoff, analysts said.

Money managers say they will be looking elsewhere for returns after chasing the U.S. dollar’s gains in the past three years.

The Dollar Index has extended 2014 gains, up near-9 percent against a basket of major world currencies. Some individual currency trades, like USD/Brazil Real, have netted currency investors huge returns, a CNBC report said.

The performance was only beaten by the digital currency bitcoin up 40 percent this year to 428 dollars.

The dollar’s gains are already losing steam in parts of Asia, with the Indonesian rupiah rallying 7.3 percent in the fourth quarter, the Malaysian ringgit 2.5 percent and the Singapore dollar 0.9 percent, according to a Bloomberg report.