Dollar bulls still out in full force

The greenback nosedived on Wednesday on the back of the Federal Reserve’s policy statement, sparking calls for a correction given its recent rally, but dollar bulls aren’t shying away.

“Six months forward, we expect the dollar to be trading 3 to 5 percent above current levels,” said Kathy Lien, managing director at BK Asset Management, in a note late on Wednesday.

The U.S. dollar index endured its biggest single-day decline in six years on Wednesday, retreating from recent twelve-year highs, after the Federal Reserve dropped the word ‘patient’ from its policy statement, signaling its intention to raise interest rates this year. Its fall saw the euro bounce off a twelve-year low and lifted the yen to a three-week high.

The dollar’s decline was atypical given the prospect of tighter monetary policy, but experts attributed the drop to the Fed’s lower growth and inflation forecasts, which pushed back expectations for a rate hike in June.

Read MoreEuro-dollar parity may be more elusive after Fed

“U.S. front-end rates fell sharply in response [to Fed projections], with the market substantially reducing pricing for a June rate hike and reducing pricing for cumulative tightening by the end of 2016 by nearly 25 basis-points,” said FX analysts at BNP Paribas in a note shortly after the Fed statement.

Dollar Index

[email protected]

You may also like...

Discussion on Dollar bulls still out in full force