Dollar Rally Over for JPMorgan Asset Management on Fed Pace

The dollar rally has peaked and U.S. yields are headed lower as the Federal Reserve limits itself to one interest rate increase per year, according to one of the world’s largest money managers.

The Fed will only tighten to a terminal rate of about 1 percent “tops,” with the next hike coming in December, Nicholas Gartside, the London-based chief investment officer for fixed- income at JPMorgan Asset Management said in an interview in Tokyo last week. That “glacial” pace of policy tightening means that the dollar’s world-beating rally since mid-August is over, and the benchmark Treasury 10-year yield is likely to head toward 1.5 percent over the coming year, he said, from around 1.76 percent as of 7 a.m. in London Tuesday.

“If you think what the supports for the dollar were, they were that U.S. growth was stronger, and the Federal Reserve was going to be a lot more aggressive,” Gartside said on Oct. 20 at JPMorgan’s Tokyo office. “The growth differential has disappeared, and you’ve not really got a big difference any more in terms of central bank policies diverging. Add that together and it’s tricky to argue that the dollar should be stronger.”