In view of analysts at Citibank, although US treasury yields continue to rise, the Fed may continue to tighten monetary policy next year as the USD has stabilized against major currencies recently.
Key Quotes
“In our view, it is driven by:
- positioning that has shifted to a bullish $ stance from bearish $ earlier this year. Generally, investors are bullish $. This makes squeezes of long $ more likely.
- uncertainty around the mid terms which may see power over the Lower House revert to the Democrats, possibly accelerating the turning point where US fiscal policy becomes less $ supportive. This may be the catalyst that turns short to medium term $ strength into weakness in the long term.
- Dollar Index 0-3M forecast: 93.89; 6-12M forecast: 98.04″
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