Elias Haddad, Vice President, Global Head of Markets Strategy at Brown Brothers Harriman, expects the U.S. dollar to recover this week, especially if Oct. 23 surveys confirm the U.S. growth advantage he sees.
S&P Global Market Intelligence’s September purchasing managers’ index data indicated stronger U.S. momentum than the uneven results from other major economies. Preliminary October readings are due Oct. 23.
In his Oct. 18 note, Haddad linked recent weakness in technology shares to doubts about profits from artificial intelligence. He argued that a technology selloff could prompt foreign investors to move money from U.S. equities into Treasury securities, supporting demand for the dollar. The Associated Press reported that the Nasdaq composite fell 2.1% on Oct. 16 before rising 1.1% on Oct. 19.
A change in bond yields does not establish who bought the securities.
The 10-year par Treasury yield declined from 5.19% on Oct. 14 to 5.09% on Oct. 16, then rose to 5.15% on Oct. 19, Treasury data show. The latest Treasury International Capital figures cover August, before the technology selloff. Private foreign investors bought a net $90.9 billion in U.S. Treasury bonds and notes and $131.9 billion in U.S. equities that month.
Inflation also bears on the interest-rate outlook. The Bureau of Labor Statistics said consumer prices increased 0.6% in September from August on a seasonally adjusted basis and 3.7% over 12 months without seasonal adjustment. Gasoline drove more than half of September’s overall consumer price increase; its index climbed 9.1% for the month.
The Federal Reserve raised its target rate range by 0.25 percentage point to 3.75% to 4% on Sept. 16. The Oct. 23 surveys will test Haddad’s growth premise, followed by the Fed’s Oct. 28 rate decision and the Nov. 18 release of September foreign-flow figures.
