A greater likelihood of a Federal Reserve interest rate hike this year took a US dollar index closer to an 11-year high on Thursday, with analysts suggesting a further strengthening in the months ahead.
The Dollar Index, which tracks the greenback against a basket of six major currencies, rose 0.2 per cent to 98.14. The index is up more than 8 per cent year-to-date and 23 per cent in the past 52 weeks. Against the euro, the dollar rose to $1.08.
But the response from regional stock markets was muted. The Dubai index dropped by 0.19 per cent for a second consecutive day of declines. The Abu Dhabi market fell 0.21 per cent, closing lower for the first time this week.
On Wednesday, the Federal Open Market Committee released minutes from its March 17 and March 18 meeting acknowledging slowing economic growth worldwide, but said it was still planning an interest rate hike this year, which could further strengthen the dollar.
Fed officials who pushed to lift benchmark rates in June were countered by others saying a stronger dollar would combine with declines in energy prices to curb inflation.
“It is important to watch the dollar index level, especially as it approaches the 101.70 mark, as it represents a cyclical resistance point, and in our estimation there is a low probability of it breaking above this level unless the Fed raises the rates,” said Nour Eldeen Al Hammoury, the chief market strategist at ADS Securities in Abu Dhabi.
“Going through this mark could signal the start of a further strengthening of the dollar,” said Mr Al Hammoury.
The UAE is poised to both benefit and suffer from a more expensive dollar.
“The dirham/dollar peg is opening up investment opportunities both in Europe and Asia, [but] the downside will be for UAE exports and the tourism sector,” Mr Al Hammoury said.
As the strengthening dollar makes American goods and services more expensive than elsewhere, it also reduces the value of US corporate profits from overseas operations. In 2012, the S&P 500 companies that provided details on foreign sales showed that almost 47 per cent of total sales came from abroad.
“The strong dollar may well impact a number of large US companies that compete in world markets,” said Pradeep Unni, the head of trading for commodities and currencies at Richcomm Global in Dubai. “Many Arab nationals have investments in US stock markets, and any such decline will only hurt their profit.”
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The years Ramadan fell in May
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Tips for newlyweds to better manage finances
All couples are unique and have to create a financial blueprint that is most suitable for their relationship, says Vijay Valecha, chief investment officer at Century Financial. He offers his top five tips for couples to better manage their finances.
Discuss your assets and debts: When married, it’s important to understand each other’s personal financial situation. It’s necessary to know upfront what each party brings to the table, as debts and assets affect spending habits and joint loan qualifications. Discussing all aspects of their finances as a couple prevents anyone from being blindsided later.
Decide on the financial/saving goals: Spouses should independently list their top goals and share their lists with one another to shape a joint plan. Writing down clear goals will help them determine how much to save each month, how much to put aside for short-term goals, and how they will reach their long-term financial goals.
Set a budget: A budget can keep the couple be mindful of their income and expenses. With a monthly budget, couples will know exactly how much they can spend in a category each month, how much they have to work with and what spending areas need to be evaluated.
Decide who manages what: When it comes to handling finances, it’s a good idea to decide who manages what. For example, one person might take on the day-to-day bills, while the other tackles long-term investments and retirement plans.
Money date nights: Talking about money should be a healthy, ongoing conversation and couples should not wait for something to go wrong. They should set time aside every month to talk about future financial decisions and see the progress they’ve made together towards accomplishing their goals.
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