As investors continue to react to the effects that “massive American equity-market gains” are having on their portfolios, the dollar’s weakest quarter in a decade may get worse. This according to a recent Bloomberg article.
As America’s economy “shows signs of recovering from its pandemic-induced slump,” the article reports that the Bloomberg Dollar Spot Index has “plunged close to 5% this quarter and is on track for its biggest slide since 2010.” It notes that the equity outperformance may trigger global money managers to “realign weightings of their portfolios in an effort to maintain appropriate risk levels” which could lead to funds selling dollars and purchasing currencies linked to underperforming share markets (i.e. British pound and Australian dollar).
“Moreover,” the article notes, “with equity and currency volatility levels holding firm, rebalancing flows may begin to enter the market sooner rather than later as managers adjust holdings ahead of the last day of the quarter.”