“We expect all major central banks on hold until at least late 2015 -- hence, no immediate catalyst” for further gains in the dollar, Stolper said.
While strategists predict broad dollar gains, investors are hedging their bets ahead of the Dec. 17-18 Fed meeting.
Futures traders reduced net wagers that the dollar will gain versus eight peers including the euro, yen and pound to $18.9 billion as of Dec. 3, from $19.1 billion a week earlier, according to Commodity Futures Trading Commission data compiled by Societe Generale SA. The net long position on Nov. 26 was the most since Sept. 10.
Following the end of the first two rounds of quantitative easing, the dollar showed little momentum. The Bloomberg U.S. Dollar Index rose 0.4 percent the month after what’s known as QE1 was completed in March 2010, and fell 1.3 percent the month after QE2 in June 2011.
Inflation Change
“The dollar may stay here for a while as the Fed will get away with the story of inflation is nowhere to be seen,” Jose Wynne, the head of foreign-exchange research at Barclays in New York, said in a phone interview. “But this may change in the second half of next year, when inflation starts to turn around.”
Barclays forecasts the dollar will rally to $1.27 against the common currency by the end of 2014.
Since reaching a three-year high of 3.9 percent in September 2011, inflation has slowed. In October, consumer prices rose 1 percent from a year earlier, the smallest increase in four years, according to a Nov. 20 Labor Department report.
Better economic growth in the U.S. relative to most developed nations will support the dollar, according to Morgan Stanley. The world’s biggest economy will grow 2.6 percent in 2014, versus 1 percent in the euro area and 2.4 percent in the U.K., according to separate Bloomberg surveys.
Key Drivers