US dollar is only game left in town

A surging dollar is now the only possible hedge for what's turning into the biggest destruction of shareholder value since the global financial crisis.

With global equities having already lost US$23 trillion (HK$179.4 trillion) this year, the US currency's inverse relationship with risk assets makes it the only game in town for at least the rest of 2022, says Citigroup.

Other financial institutions like the Canadian Imperial Bank of Commerce says the US dollar is set to keep rising, while Brown Brothers Harriman says the global backdrop continues to favor the US currency.

The Japanese yen, already languishing at a 24-year low, tumbled to within a whisker of the closely watched 145 per dollar level, while China's yuan slid beyond 7.

The Canadian currency dropped to the weakest in almost two years, and the Australian dollar is on the brink of a new multi-year low.

US gross domestic product will increase 1.1 percent in 2023, economists including Jan Hatzius wrote in a note, compared with a forecast of 1.5 percent previously. The projection for 2022 was left unchanged at 0 percent.

In addition, the European Central Bank could raise interest rates into next year, causing pain for consumers as it tries to depress demand that is now increasingly adding to sky-high inflation, chief economist Philip Lane said.