Exporters to meet BOT chief to voice concerns over baht’s appreciation

‭‭The baht reversed gains and weakened against the US dollar‭ in the ‬‬first two trading days of the year, but it continued to be traded in a narrow range. The Bank of Thailand signalled that it was closely monitoring the baht’s movement after it broke Bt30 to the US dollar to hit a six-and-a-half-year high of Bt29.75 amid thin trading volumes during the last ‬days of 2019. In addition, the weakening regional currencies weighed down the baht sentiment later in the week. On ‭Friday, ‭ ‬(January ‬3), the baht ‬closed ‬at ‭Bt30.16/USD versus the Bt30.15/USD reported on Friday (December 27, 2019). ‬

‭During the week of January 6-‭10‬, KBank expects the baht to move within a range of Bt3‭0-‭30.‬30/USD.‭ A key domestic factor to be ‬monitored closely ‭is ‬the debate on the 2020 Budget Bill in the Thai parliament. External factors will include issues in‬ ‭the ‬next phase ‭of ‬the ‬US‭-China trade talks after the signing of ‭the‬ first phase agreement, the Middle East tensions, the UK parliament‭’s‬ consideration of the Brexit deal, and ‬Chinese economic data for‬ ‭December. The ‭US ‬economic ‬data ‭to be ‭ ‬released during ‭the week ‬include ‭ ‬December ‭non-farm payrolls data, unemployment rate, ADP employment report, and the purchase managers’ index and ISM non-manufacturing surveys, as well as the November factory goods orders data.

The assessment will take into account the adverse impact of the baht appreciating to between Bt29-Bt31 to the dollar. The private sector is concerned about the baht appreciatimg to Bt29 in the beginning of this year, he said.

“We previously expected that the baht would not appreciate further, because it could erode our competitiveness and cause us to loose export markets to our competitors,” he said.

The baht has been the strongest currency in Asia and it ranks fourth among the strongest global currencies, he said.

Over the past two years of the strengthening baht, Thai exporters have lost about 17 per cent of total export value, he said.

Some businesses have suffered losses from the unfavourable exchange rate and many struggle to make profits, he said, adding that manufacturers could not increase production because of drop in orders, according to Visit.

The government recently set up a committee to look into the issue of the baht’s appreciation. However, they could not implement any effective measures as power was in the hands of the central bank, he complained. The Bank of Thailand (BOT), however, said earlier that the baht had moved beyond the Bt30 level during the New Year holidays because of the thin market and it retreated when the market returned to normal on January 2.

Exporters will meet with central bank governor Veerathai Santipraphob on Friday (January 10) to discus about the issue of the baht’s appreciation, he said.

The private sector would like the baht to stay around Bt31 to the dollar, or stay close to the value of competitors’ currencies, he said.

“We’re concerned very much that the baht may appreciate further and surpass the Bt29 level, that would severely hurt Thai exports and the country’s competitiveness.”

Meanwhile, Siam Commercial Bank’s Economic Intelligence Centre (EIC) forecast that the baht would appreciate to 29.5-30.5 by the end of this year.

The EIC believed that there were many factors behind the baht’s appreciation this year. However, the pace of strengthening may not be as fast as last year’s, said the EIC.

The baht averaged 31.05 per dollar last year, or up 4.1 per cent from 2018.

The baht’s Nominal Effective Exchange Rate was 123.2 last year, or up 6.6 per cent from 2018.

The research centre expected Thailand to continue to have a high current account surplus this year, about 6 per cent of GDP, compared with 6.3 per cent of GDP last year. Factors driving the current account surplus include flat exports and imports, expansion of tourism, and weak investment. Combined with high international reserves, the baht has been a regional safe haven currency and demand is high among investors.

The impact of the US-China trade deal would lead to funds inflows into emerging markets including Thailand. The dollar is expected to weaken during the global recovery then it would indirectly boost the baht value relatively. However, the weakness of the dollar is not much as the US Federal Reserve would keep its policy rate unchanged this year, while the European Central Bank and the Bank of Japan are expected to further ease their monetary policies leading to a relatively weaker euro and yen.

The BOT has limited tools to deal with the baht appreciation because it cannot cut the policy rate any further as it is already at a historic low at 1.25 per cent. Moreover the BOT could not intervene much in the exchange rate market because it fears that the United States may accuse Thailand of being a currency manipulator.

The Chinese yuan is on a rising trend after the US and China reached an agreement on the first trade deal. This will pull the Thai baht up too, said the EIC.

However, there are factors that could limit the pace of the baht’s strengthening. Thai corporates are likely to invest more abroad due to slower economic growth in the country. Thai investors are also encouraged to invest more in foreign financial assets. As risk of the global economy reduces, it may cause gold prices to reduce or not increase much this year, which will lessen pressure on the baht, compared with last year when gold price rose high. Thai investors sold gold for profit and exchanged for the baht, the EIC said.

“The conclusion is that the baht is strengthening and would continue the trend this year, but the pace of the appreciation may be smaller than last year’s,” the EIC added.

The ministry believes the impact could be more if the situation is not resolved.

Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office (TPSO), revealed that the US operation that killed powerful Iranian commander Maj-General Qassim Suleimani on the morning of January 3 will have effects on the macro-economy and cause fluctuations in the money and capital markets.

The situation will encourage investors to turn to low-risk assets and could lead to a rise in the price of gold.

However, in the medium to long-term, the TPSO estimates that these events will have only a slight effect on confidence and the investment climate.

It is expected that the overall global economy should be better than last year with other positive factors helping alleviate the effects, such as the progress in the US-China trade agreement and the economic stimulus measures of many countries. If there is retaliation and the shipping routes are closed, the oil price will tend to increase further because most of the oil from the Middle East goes through the Strait of Hormuz with Iran being the main player in controlling the route.

Global shipping will be affected as more than 20 per cent of trade passes through the Strait of Hormuz. If the route is closed, tanker ships and cargo will not be able to use the channel to enter the Indian Ocean.

As for the issue of trade, Thai exports related to oil (plastics, chemicals, petroleum products, crude oil, natural gas, gas, and petroleum liquids) were worth $22.87 billion, or about 11 per cent of total exports in 11 months of 2019. However, the unrest will increase the challenge to revitalise the export markets in the Middle East, especially Iraq and Iran and the African market using the Middle East as trading posts for Thai products.

“The Ministry of Commerce is ready to lead the private sector to tap the markets of at least 16 countries, including the Middle East in 2020,” Pimchanok said. She added that although Thailand was currently not directly affected, aside from capital markets, money markets and high volatility in oil prices, the TPSO would closely monitor the situation and prepare a response plan.

“In the first 11 months of 2019, trade between Thailand and the Middle East totalled $25.68 billion ( 5.8 per cent of total trade), with exports valued at $7.64 billion and imports at $18.03 billion. The trade between Thailand and Africa is worth $9.37 billion ( 2.1 per cent of total trade), with exports worth $6.28 billion and imports of $3.08 billion,” Pimchanok added.

These projects will help stimulate the grassroots economy, especially the community-based power plant scheme.

The power plant project will open for registration and auction in February. It will generate a total of 700 MW from private producers at a combined investment of Bt70 billion.

“After official opening, investors under the “Quick win” initiative can start plant construction in provinces rich in natural resource for power generation driven by renewables, such as Ubon Ratchathani,” Sontrirat said.

With 256.9 MW of power generating capacity planned in three southern provinces, the ministry will decide on the type of investment in view of previously-approved projects, such as the Pracharath power plant.

The ministry will promote diesel B10 as a main source of energy, in place of diesel B7, as a means of stabilising palm oil prices. Currently, raw palm price stands at Bt6 per kilogram compared to Bt33-34 for crude palm oil per kilogram. In March, it will promote sugarcane and cassava in fuel production through the mix of ethanol and gasohol.

After the community-based power plant project, he said, the ministry will turn to promote waste-to-energy plants under Power Development Plan 2018. It will buy 400MW from waste-to-energy community plants and 44MW from waste-to-energy industrial plants. “However, the plan needs extensive study, especially the volume of purchase”.

With the United States and China fiercely competing for economic hegemony, the government has concluded it is necessary to draw up basic national principles, according to sources.

The National Security Council will start discussing a new strategy in April. The economic group – which will be newly established under the National Security Secretariat of the Cabinet Secretariat – will be in charge of compiling the strategy.

The new strategy is expected to be discussed at four-minister meetings at the NSC at first, and will be decided at nine-minister meetings, the sources said.

The five main pillars of the government’s envisaged strategy are:

– Development of science technology and protection of sensitive information

– Protection of maritime rights and interests in territorial waters and exclusive economic zones

– Removal of potential threats from 5G next-generation telecommunications standards, and measures to combat cyber-attacks

– Strict management of the export control system and measures for foreign investment in Japan

– Cooperation with foreign countries on infrastructure.

Based on the new strategy, the government plans to focus on efforts to protect national interests in these fields. If necessary, the government will establish a new legal system and take measures in cooperation with the private sector.

The National Security Strategy, which serves as a basic principle of security policy, makes little reference as to how the government should handle 5G and other security-related crucial technologies. The strategy, which was decided by the Cabinet in 2013, replaced the Basic Policy for National Defense adopted in 1957.

It also does not refer to how Japan should handle products that raise concerns over security such as the ones from Huawei Technologies Co., a major Chinese telecommunications equipment maker. The United States, meanwhile, has heightened security concerns over Huawei products.

While Japan possesses internationally superior technologies in such fields as artificial intelligence, brain science and quantum cryptography, it is said that universities, research institutes and private companies in the nation have failed to take sufficient measures to prevent technology outflows.

Under the new strategy, the government and the private sector plan to work together to prevent the outflows of advanced technologies by thoroughly managing the information.

In addition to defense technologies, the government will include in the strategy the development of Japan’s own advanced technologies that can be used for military purposes in the future.

It also will include the protection of maritime information in territorial waters and other areas. Data on the topography, geology and water quality of the seabed are essential for military activities, including submarines.

However, domestic laws don’t restrict foreign research vessels or companies from conducting ocean surveys for constructing offshore wind power generation or laying undersea cables.

Thus, relevant ministries and agencies plan to work closely on preventing foreign elements from conducting such surveys in ways that could lead to the transfer of strategic information out of the country.

In mobile phones and other businesses, the government is expected to call for stricter screening of foreign investment in Japan. The move is designed to prevent leaks of confidential information, and includes measures against Huawei and China’s DJI, the world’s leading drone maker. The government will also consider strengthening the protection of key infrastructure operated mainly by the private sector in the event of an emergency.

“No real oil volumes have been lost, and the overall market is well supplied. In fact, Saudi Arabia has significant spare capacity at the moment,” John Kilduff, an analyst with Again Capital, a New York investment firm, wrote in an email. “Still, this is a big deal, and the market is on tenterhooks, awaiting Iran’s response.”

The killing of Qasem Soleimani, commander of Iran’s Quds Force, whose car was struck by a missile as he was leaving the airport in Baghdad late Thursday night, was described as a “cowardly and vicious act” by Iranian President Hassan Rouhani. “Iran will take revenge for this heinous crime,” he said.

Iran’s defense minister, Amir Hatami, said the strike by the “arrogant U.S.” would be met with a “crushing” response. Foreign Minister Mohammad Javad Zarif called the strike an “act of international terrorism” and said in a tweet that the United States “bears responsibility for all consequences of its rogue adventurism.”

An obvious point of vulnerability is the narrow Strait of Hormuz, hemmed in by Iran’s southern coast. About a sixth of the world’s oil supply passes through the waterway, which is 21 nautical miles wide at its narrowest point, and has been deemed “the world’s most important choke point” by the U.S. Energy Information Administration. The quantity of oil ferried through the strait – much of which is headed for China, India and Japan – is nearly double that of all U.S. oil production. Should threats of attack close the passage, there could be devastating consequences for the world economy.

Other potential Iranian targets are oil fields and facilities in Iraq or Saudi Arabia.

Two oil tankers in the Persian Gulf were crippled by attacks in June, and drone strikes on state-owned Saudi Aramco in September temporarily took 5.7 million barrels of crude, or 6 percent of worldwide consumption, out of daily circulation, causing the biggest daily jump in oil prices since 1988. Production was restored within two weeks, and price increases following both incidents – as much as 15 percent following the drone attack – fairly quickly subsided.

In a note issued late Thursday night, ClearView Energy Partners, a research firm based in Washington, said it is reasonable to expect Iranian reprisals “possibly via all three avenues Iran has pursued in the recent past: (1) targeting regional shipping and energy production; (2) proxy (and principal) attacks against U.S. assets and allies, including cyberattacks; and (3) further nuclear brinkmanship.”

Any one of those, it said, would send oil prices higher. The note also argued that market prices continue to suggest undue faith in “Iranian rationality and U.S. restraint.”

Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland, wrote in an email: “Direct attacks against U.S. personnel, diplomats or vessels or a return to targeting (Persian) Gulf oil infrastructure or tankers could easily add another $5-10 dollars per barrel to the price. Should conflict escalate to an all-out conventional conflict including the U.S. and Iranian militaries in the Gulf, crude prices could spike into the triple digit range.”

In a paper issued last summer assessing the impact of a conflict in the region, Rapidan argued that a disruption in the Strait of Hormuz could last “for many weeks, if not longer.” It suggested that a major U.S. military operation would see oil prices spike, recede, but then grow steadily higher again as expectations of a “quick and total victory” would undoubtedly be proven wrong. It also predicted that in such a case China would immediately begin hoarding oil, quickly sending prices even higher.

But analysts agreed that all they can do at this point is speculate.

“While there is no immediate, direct impact on oil supply from Iran or any other country, events such as this have the effect of raising the geopolitical risk premium in oil prices,” said Pavel Molchanov, an oil analyst with Raymond James. “We will need to watch how Iran responds, and whether its response might lead to an actual supply disruption.”

Molchanov pointed out that shutting down the Strait of Hormuz, while dramatic, would cause serious damage to Iran’s own economy, which is already struggling under the weight of American sanctions. They have cost the nation $200 billion in revenue since being imposed in 2018, pushed inflation up to about 40 percent, and created food shortages.

McNally said there could, conceivably, be a bright side. He expects the killing of Soleimani to bring the U.S.-Iran confrontation to a head, and that raises the possibility of an eventual deal that could exert downward pressure on oil prices. But there could well be some difficult moments before that happens.

On Friday morning Brent crude rose nearly 4 percent, before dropping back an increase of about 3.5 percent later in the day. West Texas Intermediate was up just shy of 3 percent. Oil company stocks also climbed.

In Russia, the world’s second-largest producer of oil after the United States, the stock index hit an all-time high on the news from Baghdad.

But in New York, Wall Street’s euphoric start to 2020 took a sobering hit, with the Dow Jones industrial average falling more than 340 points at the opening bell. The blue-chip index clawed back some of those losses and closed the day down 234 points, or 0.8 percent, to finish at 28,634. The Standard & Poor’s 500 index ended the day at 3,234, down 0.7 percent. The tech-heavy Nasdaq composite lost 71 points, 0.8 percent, to settle at 9,020. All three indexes had set record highs Thursday, the first day of trading of the year.

Gold, a haven for investors in tumultuous times, jumped 1.5 percent to $1,551 an ounce, a four-month high.

Oil prices were dampened all through 2019 by a huge worldwide oil glut; the year also saw the United States become the global leader in oil production, exporting petroleum for the first time in decades. Both developments could serve to mitigate the effects of a Middle East military escalation, analysts said, although Saudi and Russian decisions to cut production in December have helped to prop up the price.

Kilduff cautioned, as well, that the risks to oil production in the Middle East are real and have probably not been adequately reflected in the world’s oil price.

U.S.-Iranian tensions have been building since 2018, when Trump pulled out of a 2015 nuclear deal and reinstated sanctions.

Saudi Arabia, Iraq and Kuwait have grown in importance as U.S. sanctions have helped push Iran as well as Venezuela – once major producers – off the oil supply grid. Iran’s oil minister has accused the United States of imposing the sanctions to gain market clout as it enjoys a shale boom. The U.S. Energy Information Administration predicts the average American output will reach 13.2 million barrels per day in 2020, an increase of 900,000 barrels per day from 2019.

The Strait of Hormuz is crucial to the major Asian economies, including China, South Korea, Japan and Indonesia. Saudi Arabia, for example, is the largest supplier of crude oil to China, eclipsing Russia this past year.

More than 70 percent of Saudi crude production, about 5 million barrels a day, is earmarked for Asia. But major consumers such as Japan, India and South Korea have been shifting to North American oil sources during the past year because of the fear of disruption in the Middle East, according to S&P Global Platts. Those concerns were amplified by the attacks on oil tankers and strikes on Saudi oil fields in 2019.

Stocks and Treasury yields, already lower after a U.S. airstrike killed one of Iran’s most powerful military leaders, extended declines after the report.

The Institute for Supply Management’s purchasing managers’ index fell to 47.2 in December from 48.1, the fifth straight month of contraction and missing estimates for a rise in a Bloomberg survey of economists, according to a report Friday. It was the worst reading since June 2009 and marked the eighth decline in the last nine months. Readings below 50 indicate activity is shrinking.

The deterioration was driven by the weakest gauges of new orders and production since April 2009. The data show American factories remain plagued by pullbacks in business investment at home, softer demand throughout the world and, until recently, an escalating trade war between the U.S. and China.

“Trade issues remain an issue for supply managers,” Timothy Fiore, chair of the ISM’s manufacturing survey committee, said on a call with reporters. “I think that unplanned factory closures and extended holiday periods had a part to play on the production side and likely the employment side.”

Fifteen of the 18 manufacturing industries reported contraction in December, led by apparel and wood products.

To be sure, the sub-50 ISM reading contrasts with IHS Markit’s purchasing managers’ index, which eased slightly to 52.4 in December but remained near a seven-month high. The nation’s two most-watched manufacturing surveys pointed in different directions in November as well, underscoring disagreement among economists and investors on which index offers a more accurate picture of the sector.

The ISM index averaged a reading of 51.2 for all of 2019, also the lowest in a decade. That’s down 7.6 points from 2018’s average, the steepest drop since 2001.

Even so, economists expect the record-long U.S. expansion to continue in 2020 despite factories’ malaise. A partial trade deal between the U.S. and China was announced Dec. 13, and President Donald Trump said this week that he will sign it Jan. 15.

While a thawing in trade relations could help, factories still face the repercussions of policy uncertainty, a weak corporate investment climate and a step down in global growth that will have a lingering impact on factory decisions in 2020.

One reason the ISM’s gauges of production and new orders may have trouble recovering quickly is Boeing’s struggle with its 737 Max airplane. Boeing told its suppliers to suspend parts shipments starting in mid-January following the grounding of the aircraft. Fiore said Boeing’s problems will probably be a drag on manufacturing for the next four to six months.

The ISM’s gauge of factory employment fell in December to the lowest level since January 2016, suggesting further softness in manufacturing hiring even as the rest of the jobs market remains broadly strong.

An index of prices paid showed input costs rising for the first time since May as the gauge of supplier deliveries held above 50, suggesting shipments of inputs are slowing.

The imports gauge contracted for the eighth time in nine months and the export gauge dipped further below the line between expansion and contraction.

Yet many market watchers still think the social-media company has the right formula to boost advertising revenue and win over investors.

Almost half of Wall Street analysts tracked by Bloomberg recommend buying the stock and hedge funds now account for 22% of shareholders, up from 16% in August, according to data compiled by Bloomberg.

Bulls say that Pinterest’s online site is a marketer’s goldmine, and the only issue the company faces is figuring out how to better cash in on it.

“It’s caught on something really unique,” Wedbush analyst Ygal Arounian, who rates the stock outperform, said in a recent phone interview. “They just need to be able to execute and put all the pieces together in order to capture that opportunity.”

Shares in the unprofitable company have fallen 49% since an August high in an environment that has seen investors pressuring management teams for profitability after years of pushing growth at all costs.

San Francisco-based Pinterest, with a market value of $10.3 billion, operates a site with more than 320 million monthly active users spread across the world.

The site allows users to scroll through a feed of “pins” that contain images or videos and links and descriptions. Users can then save the pins to customizable boards to curate ideas for anything from vacation plans to dinner recipes or holiday shopping lists.

Pinterest’s pitch for marketers is that, while advertisements often act as a distraction on other sites, more users come to its site with an intent to make a purchase. That makes advertisements an inherent part of the Pinterest user’s experience, rather than something negative, the company said in its prospectus.

Analysts who agree with that premise say the stock is attractive even after a third-quarter revenue miss led to a 17% plunge in one day. The company is expected to report $1.11 billion in revenue for 2019, up 47% from the year before, followed by more than 30% growth in each of the next two years.

The company is “heads-down focused” on improving its ad tech stack and gain wallet share from digital media peers in 2020, Wedbush’s Arounian said in a written report Friday. There’s a lot of work to do, but “minor wins can go a long way” to better-than-expected results this year with the bar now reset significantly lower, he wrote.

Pinterest is developing digital advertisement tools to give marketers insight into their audience, adding features that allow users to shop directly from the site and expanding their advertiser base to more small- and mid-sized businesses.

“The stronger that ad tech toolset is and the more things they could address for advertisers, the more money advertisers will be willing to spend on the platform,” Arounian said in the phone interview. “That could help re-accelerate growth.”

Analysts who are more cautious raise a variety of concerns. They note slowing growth in Pinterest’s more lucrative U.S. user base and say the company won’t win over investors until it can consistently deliver quarterly gains in line with Street expectations.

Pinterest’s monthly active users hint at saturation in the U.S., MKM Partners’ Rohit Kulkarni said in a note following the company’s third-quarter earnings report in October.

“Given the growth rate of users in the U.S. and the level of engagement that the users in U.S. exhibit, it makes me wonder how large can this company become over the longer-term,” Kulkarni said in a phone interview. “It remains unprofitable right now, so I’m still on the sidelines.”

While there’s substantial upside potential in the faster-growing international user base, that won’t support the stock until the company can reduce the revenue gap with U.S. users, he said.

The average revenue per international user is about one-twentieth that for a U.S. user, Kulkarni said, while that number is more like a seventh or eighth for other sites such as Facebook.

Shares of Pinterest fell as much as 1.9% in early trading Friday.

Still, some of the disappointment with the company’s progress might come from investors setting a high bar, said D.A. Davidson analyst Tom Forte, who upgraded his rating on the stock to buy after the third-quarter earnings report.

“When people look at Pinterest through the lens that they’re unicorns, then I think it’s a victim of high expectations,” Forte said. “As a long-term follower of both e-commerce and social networking companies, I’ve been pleased by their initial performance.”

Pinterest is expected to report fourth-quarter results in mid-February.

Bullion rallied as much as 1.5% to $1,551.52 an ounce in the spot market, reaching the highest since September. Platinum futures briefly topped $1,000 an ounce to touch the highest since early 2018 in New York, while silver and other haven assets rose.

The strike in Baghdad ordered by President Donald Trump killed Qassem Soleimani, the Iranian general who led the Revolutionary Guards’ Quds force. Iran’s supreme leader vowed “severe retaliation.” The news helped gold to build on the biggest annual gain in almost a decade, a rally that was driven by a weaker dollar, lower real rates and geopolitical concerns.

“Market players are now afraid that this marks another level of escalation in a region that is characterized by tension,” Daniel Briesemann, an analyst at Commerzbank AG, said by phone Friday. “The U.S. airstrike in Iraq, that’s the one and only driver of gold prices today.”

Gold for immediate delivery was up 1.3% at $1,549 by 10:15 a.m. in New York, taking this week’s gain to 2.5%, the most since August. The metal jumped 18% last year.

Last year’s advance marked a positive shift in investor attitude toward gold, according to RBC Capital Markets, which predicted further gains this year and next. Goldman Sachs, Citigroup and UBS Group have said they’re looking for $1,600 an ounce.

“Today’s event has probably only brought forward the inevitable test of the September high,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Rising inflation concerns through higher input prices — oil and food — combined with geopolitical uncertainty is a potent cocktail which supports a market already on the move.”

January is historically gold’s best month, according to Bloomberg Intelligence, with an average advance of 2.7% over the past 20 years. The metal will approach $1,600 by February if it matches the 5.2% average increase of the past five years.

Still, geopolitics typically doesn’t have a lasting impact on gold unless broader consequences for the economy or financial markets arise, said Carsten Menke, an analyst at Julius Baer.

Gold extended gains after the latest U.S. ISM manufacturing data showed the weakest monthly performance since the end of the recession, according to a report Friday. That strengthens the case for owning bullion as a hedge against dimming growth outlook.

The purchasing managers’ index fell to 47.2 in December from 48.1, missing estimates for a rise in a Bloomberg survey of economists.

Next up, investors await minutes from the Federal Reserve’s last policy-setting meeting due later on Friday.

Other precious metals:

– Platinum futures climbed as much as 1.7% to $1,001.40 an ounce in New York, reaching the highest for a most-active contract since February 2018It traded at $993.90 at 10:20 a.m.

– Silver and palladium futures also advanced.

That’s the view of a growing number of fund managers and strategists including those at M&G Investments Ltd., Brandywine Global Investment Management and ABN Amro Bank NV. A truce in the U.S.-China trade war, improving global growth and a shrinking yield premium on U.S. Treasuries will undermine the currency, they said.

“We expect to see better growth in the rest of the world ex-USA,” said Jack McIntyre, a portfolio manager at Brandywine Global Investment Management in Philadelphia. “The primary driver of dollar weakness will be a shift in relative economic growth rates between the U.S. and the rest of the world.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 global peers, slid 2% in December, the biggest monthly decline in almost two years. The gauge’s failure to sustain gains made earlier in 2019 may have drawn a line under a rally that saw it surge about 40% from a low in 2011 to a peak in early 2017.

The dollar started to fall from October as Washington and Beijing closed in on an initial deal to end their trade dispute. The agreement was confirmed by U.S. President Donald Trump in December. Hedge funds and other speculative investors flipped to a net short position on the greenback for the first time since June 2018 following the news, according to data from the Commodity Futures Trading Commission.

“You had safe-haven support for the dollar in 2019, but we have a trade truce now,” said Georgette Boele, senior foreign-exchange strategist at ABN Amro Bank in Amsterdam. “The dollar is on a path of long-term weakness.”

Another major pillar behind the dollar’s multi-year advance was also undermined as the Federal Reserve cut its benchmark rate in July, September and October to support slowing growth.

“The Fed does have some room to move lower in 2020, and for this reason I would expect a weaker dollar,” said Jim Leaviss, head of fixed-income at M&G Investments in London. There may also be “more pressure on the Fed if growth remains mediocre going into the U.S. elections,” he said.

Treasury 10-year yields dropped almost 80 basis points over the course of the year. The Fed’s dovish pivot has seen the U.S. two-year yield advantage over similar-maturity German debt shrink to 217 basis points from around 350 basis points in late 2018, according to data compiled by Bloomberg.

Not everyone is convinced the dollar is poised to keep weakening.

Citigroup recommends betting the greenback will strengthen against the euro and Canadian dollar on a view the U.S. economy will outperform the rest of the world. Goldman Sachs argues the dollar will only decline if the euro and yuan appreciate significantly, and it says that looks unlikely for now.

Back on the bearish side, National Australia Bank Ltd. is looking for further dollar losses, but sees more of a grind lower than a sudden sell-off.

“The dollar is set to begin 2020 fundamentally overvalued,” strategists at the bank including Ray Attrill in Sydney wrote in a research note. “We expect it to fall in 2020, but in a relatively sedate fashion barring resumption of Fed easing or dramatic improvement in growth prospects outside the U.S.”