Is Dollar Next? Investors Reassess After Swiss Shock

After Switzerland shocked markets by scrapping its currency cap, investors are beginning to ask whether a policy surprise may be lurking for the dollar, too.

Samson Capital Advisors LLC said the Swiss move, which sent the franc surging as much as 41 percent against the euro last week, was “a good reminder” of the risks of following the herd, just as speculators pushed bets on a dollar rally to a new high. A shock from the Federal Reserve, such as raising interest rates less quickly than investors expect, may derail the greenback after it advanced to the highest in a decade, State Street Global Advisors Inc. warned.

A small downturn in the U.S. economy, “just enough to make people say maybe rates aren’t moving higher, the Fed is on hold -- that could take some of the sheen out of the dollar’s shine,” Greg Peters, a senior investment officer at Prudential Financial Inc.’s fixed-income business in Newark, New Jersey, said Jan. 15 by phone. His division oversees $534 billion of bonds.

Forecasts in Bloomberg surveys still see the U.S. currency gaining versus all except 10 of its 31 most-traded peers by year-end, after climbing against all of them in 2014.