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Dollar to outperform against euro on China risks

Dollar Stamina Hinges More on China Than Fed, Bank of America Says.

BofA’s measure of China reflation near 2022 lows as fears grow

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The chances of the dollar adding to its nearly 3.5% advance since mid-July depend more on the fate of economic growth in China rather than changes to interest rates from the Federal Reserve, according to macro strategists at Bank of America.

In a note published Tuesday, Bank of America’s Adarsh Sinha and Janice Xue wrote that they are bullish on the dollar, “but a lot hinges on whether China rolls out meaningful, coordinated stimulus in coming weeks.”

Optimism at the prospect of China’s economic reopening following the pandemic reached peak levels in February.

Since the greenback is considered a safe haven by most investors, the dollar has historically been negatively correlated to the outlook for growth in China, a key determinant of global risk sentiment and trade.

But that outlook has tumbled in recent months as a growing real estate crisis imperils the Chinese rebound from the pandemic.

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