The USD reasserted its strength on Thursday after a sizeable retracement in the previous week and against most currencies, it appears to be establishing itself in a stronger range in recent weeks, according to Greg Gibbs, Analyst at Amplifying Global FX Capital Pty Ltd.
Key Quotes
“However, the recent rebound in the USD has not coincided with a fresh rise in US rates and yields relative to other currencies.”
“US yields have slipped, narrowing the USD yield advantage against several other low yielding major currencies; including the EUR, JPY and GBP. US yields have fallen more than in Canada and in line with AUD and NZD yields.”
“This suggests that the market is seeing a greater risk that weaker global growth and tightening financial conditions abroad will have negative feedback to the US economy.”
“Perhaps the USD is able to retain its rising trend because of its still significant yield advantage, even if it has been whittled down a bit recently.”
“There may still be confidence that the US economy is able to withstand the risks faced by the global economy; in this sense, it is a relatively safe place to invest.”
“The US may have much political drama, but this does not necessarily lead to political risk.”
“Some of the risks to the global economy relate to US trade policy. The market appears to sense, at least for the time being, that trade policy creates more downside risk for China, Mexico, Canada, and Europe than the USA.”
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