JPMorgan’s weak-dollar call wobbles as Iran-driven oil surge boosts pressure for a stronger greenback
Summary
- JPMorgan said it has been betting on a weaker dollar and stronger high-beta currencies, but assessed that the likelihood of a stronger dollar has increased amid a surge in Brent crude and rising geopolitical risks in the Middle East.
- Strategists said a spike in energy prices is supporting the dollar via higher safe-haven demand and terms-of-trade shifts, adding pressure on major currencies such as the euro and the yen.
- Currencies of countries with high dependence on crude imports are facing depreciation pressure, while energy-exporter currencies and safe havens such as the dollar are seeing relative gains—suggesting FX sentiment may, for now, be driven more by oil than by interest rates.
Forecast Trend Report by Period
A surge in global crude prices triggered by U.S.-Iran tensions is shaking JPMorgan’s longstanding “weak dollar” outlook, an analysis said.
According to Walter Bloomberg on the 2nd (local time), JPMorgan has been betting on a weaker dollar and strength in high-beta currencies, but it assessed that the odds are rising that the dollar could instead strengthen as Brent crude jumps and geopolitical risks in the Middle East intensify.
Strategists said the oil spike is supporting the dollar by lifting demand for safe-haven assets and shifting terms of trade. In fact, since oil began rising, major currencies such as the euro and the yen have come under pressure, while investors are moving to cut risk-asset-linked positions.
In particular, currencies of countries heavily dependent on crude imports are facing depreciation pressure, while the currencies of energy exporters and safe havens such as the dollar appear to be relative beneficiaries.
Some in the market also suggest that, for the time being, FX sentiment could be driven more by oil than by interest rates.
JH Kim
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