Where Are Currencies Headed in 2013?

Focus: CURRENCIES

We look ahead to the forex markets, where they finished and what we can expect for the first half of next year, with Dean Popplewell of OANDA.

Gregg Early: I am here with Dean Popplewell, Chief Currency Strategist at OANDA. Dean, I thought that it might be a good time, as we get near the holiday break, to ask what are you looking at for 2013.

Dean Popplewell: Obviously, 2012 has been an extremely eventful year, dominated certainly by central banks' excessive control over their balance sheets, which has led to relative limitation of volatility and decreased opportunity in the Forex markets.

In the first quarter of next year, we are seeing very much the same thing. We do not expect too much divergence in policy in the core of the G10 currencies, with the possible exception obviously for Japan, which seems to be headlining the remainder of the 2012 calendar year, obviously with the new prime minister in power.

The global economy is expected to strengthen somewhat. Because of the capital injections that hopefully move from the financial to the real economy, I think most analysts and certainly I expect a modest uptick in economic growth next year, intersecting with the still accommodating monetary policy that’s dominating obviously most of the G10 currencies. This should provide support for other asset classes like global equities as well.

We still have to contend with a lot of range trading in the currency markets and low volatility, and this environment should persist certainly in the first half of next year.

Gregg Early: So you’re not seeing any of the wild swings that we were in last year.