MAY 29, 2018 – US DOLLAR NEAR HIGH: AN OPPORTUNITY TO HEDGE F/X OBLIGATIONS
The US dollar has been outperforming foreign currencies during 2018, and has done particularly well over the last five weeks. In fact, the dollar has just had its best run in three years. The question is how long it can last? Expectations are the dollar is overbought, and poised for a retreat.
The dollar has been moving in correlation with US treasury yields, and slowed when the 10-year US yields stalled just below its six-year highs set last week. If the Fed holds back on a fourth rate hike this year, it could mean the dollar has peaked in value.
If you have foreign currency obligations that need to be met in the future, it would be profitable for you to take advantage of the current strong US dollar. By using a hedge, you can lock into the favorable exchange rates available today to save you money when your commitments come due be it months, or years, from now.