‘Why dollar surged against naira, others in 2014’

The dollar rose against all other major currencies in 2014 for the first time since the turn of the century, as investors expecting interest rates to rise piled into the greenback, Financial Times has reported.

The naira also fell against the dollar by 13 per cent in the year.

The US currency made gains against the euro, yen, pound, South Korean won, Brazilian real and 11 other global currencies this year, marking the first time since the height of the dotcom boom in 2000 that all major currencies as ranked by Bloomberg have fallen against the dollar.

Expectations that the Federal Reserve will raise interest rates in 2015 from historic lows have been a major factor in the dollar’s strength, as central banks in other countries including the European Central Bank and the Bank of Japan continue to take an easing stance. The euro and the yen have both fallen 12 per cent against the dollar this year.

Investors have been reversing the trend of the past few years to put money outside the US in search of higher yields and stronger returns in emerging markets as interest rate expectations have shifted and the US economy has powered ahead — a trend that analysts are predicting will continue in 2015.

“Money that was pushed out into riskier assets and currencies is coming home,” said Kit Juckes, a foreign currency strategist at Société Générale. “The more capital-starved economies weaken in emerging markets, and the more the US economy outperforms, the higher the dollar could rise — until the Federal Reserve too is dragged into the ‘currency wars’ and tries to slow or stop the move.”

“The dollar is still a very clear trade,” said Stephen Jen, head of currency hedge fund SLJ Macro Partners.

The dollar index, which weights the US currency against a basket of major trading counterparts, hit its highest level in nine years on Tuesday and has risen 13 per cent this year.

The slump in global oil prices has also played a role in dollar strength, as oil-exporting nations have seen the value of their currencies tumble. Norway’s krone was the worst performing major currency against the dollar this year, falling 19 per cent.