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(LEAD) Dollar forecast to stay weak in short term

All News 15:35 February 09, 2017

(ATTN: UPDATES won's closing price in last para)

SEOUL, Feb. 9 (Yonhap) -- The U.S. dollar is expected to remain weak in the short term following President Donald Trump's criticism of China and Japan for alleged currency devaluation, analysts said Thursday.

In a meeting with American business leaders Tuesday, Trump lambasted the two Asian economic powerhouses for "playing the money market and the devaluation market," sending their currencies and the South Korean won fluctuating against the greenback and putting investors on edge.

With the volatility of major Asian currencies rising, investors need to put their money into the safe-haven dollar in anticipation of its upturn after a couple of months, they said.

In the wake of Trump's attack, the dollar is widely predicted to drop against the South Korean currency till March or April, which could hit a high of 1,100 won.

The forecast is backed by expectations that the U.S. Fed may find it difficult to raise interest rates ahead of the start of Britain's exit negotiations with the European Union next month. Morgan Stanley has projected the American central bank to hike the federal funds rate twice and three times in 2017 and 2018, respectively.

(LEAD) Dollar forecast to stay weak in short term - 1

Daishin Securities Co. expected the dollar to remain weak against emerging-market currencies till April when the U.S. Treasury Department is slated to put out a half-year currency report.

"Donald Trump's recent attack on China and Japan is seen as political pressure aimed at boosting the world's largest economy," said Choi Kwang-chul, a senior product planner at Daishin Securities. "The dollar is projected to undergo a temporary correction in the first quarter of this year."

Some experts advised investors to put their money into stocks in raw materials or stocks in emerging nations in light of the dollar's expected weakness, while others said now is the time to invest in dollar-denominated assets in expectation of the greenback's rise after April.

"Investors need to expand their exposure to dollar assets as the greenback is forecast to start strengthening after April," Choi said. "With political economic uncertainties escalating, it is right to invest in the dollar that is the world's key currency and only safe-haven asset."

On the Seoul foreign exchange market, the local currency closed at 1,145.80 won against the dollar Thursday, up 1.40 won from the previous session's close.

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