2014, The Year Of The Dollar: 5 Trade Ideas - Credit Suisse
As 2013 draws to an end, Credit Suisse feels that the US dollar has begun what is likely to be a multiyear bull market, as monetary policy among the major central banks diverges.
"The Fed is likely to begin the slow process of normalizing monetary conditions soon – with a first taper in the next month or two (December is a live meeting)," CS clarifies.
"In contrast, the BoJ, RBA, and the ECB are all likely to at least contemplate further easing over the course of the year, with the BoJ likely to move in Q1 and the RBA in Q3. While the ECB is concerned about disinflation it has less room to maneuver, and consequently may be once again late to the party," CS adds.
Consequently, CS expects the AUD and the JPY to fall substantially over the course of the year while the EUR will likely also retrace as the USD gathers steam.
"Cable is likely to be near a peak, however, given the relative strength of the UK economy, sterling is likely to outperform within Europe," CS projects.
"As global monetary conditions begin to normalize, many emerging market currencies are likely to come under further pressure with the Turkish lira, the Brazilian real and the South African rand likely to be among the most challenged. Gold is also likely to come under pressure," CS adds.
All in all, CS recommends the following 5 trades to leverage this USD bull market next year:
1.Long USDJPY 2. Short AUDUSD 3. Long GBP vs Scandies 4. Long USDBRL, USDRUB, and long INRIDR in EM 5. Short Gold