The U.S. will remain the ‘best house in a bad neighborhood’ and will attract capital flows from abroad,” Morgan Stanley analysts led by London-based Hans Redeker wrote in a research note dated Jan. 14. “We remain convinced U.S. dollar bulls. The secular U.S. dollar bull market has more legs.” The U.S. economy expanded across most of the country in the past six weeks as the job market showed strength that’s failing to stoke broad wage pressures, a Federal Reserve survey released Wednesday showed. It underscored the challenge facing Fed policy makers heading into a meeting later this month: The strong labor market has as yet failed to trigger signs of broader inflation, while sliding commodities put downward pressure on price expectations.
The U.S. dollar still got a bid even though short-term interest rates are falling, simply because of the safe-haven flows,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. “We all know China has issues, and those issues have been a partial cause of the risk aversion -- and you suspect that there may be more of these to come throughout the year.