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The US dollar had a mixed start to the year, but it could still be king, including against the safe haven  currencies. Here is the view from Nomura:

Here is their view, courtesy of eFXnews:

USD: Outperform; FOMC to raise rates twice in 2016. In G10 FX, we expect the USD to continue to outperform other G10 currencies, but at a slower pace than in 2015. We expect continued monetary policy divergence to drive USD strength, particularly against EUR and JPY and the commodity currencies.

We expect the second hike in the current normalisation cycle to be delivered at June’s meeting rather than earlie, with the Fed maintaining that the pace of normalisation will remain slow and gradual and thereforeour US economists expect two hikes in 2016. The forecast path for the Fed policy rate is conservative compared with the median FOMC members’ expectations of four hikes, but remain more aggressive than the current 30bp priced in by the market by year-end.

EUR: Underperform, parity by mid-2016. We continue to like EURUSD downside, forecasting parity by mid-2016. The divergence between the Fed and the ECB should remain a key market theme, provided US data hold up in coming months. In addition, mid-term EUR flows have turned more negative for EUR in 2015 and we expect significant fixed income outflows from the euro area to continue putting downward pressure on EUR.

JPY: Underperform; strong JPY selling by domestic investors and corporates to persist.  Because of monetary policy divergence and expected strong JPY selling by Japanese investors and businesses, we expect USD/JPY to resume trending higher. For the nearterm USD/JPY forecast, we downgrade our end-March forecast to 122 from 126.3 and end-June forecast to 125 from 127.5. We keep targeting end-2016 at 130.

Our economists expect the BOJ to ease again in April and monetary policy to still be USD/JPY positive . While speculative JPY positions have turned to JPY long positions for the first time since Abenomics began, gradually recovering BOJ easing expectations will likely discourage speculators from adding JPY long positions, while carry is also negative. Although speculative positions turned to JPY buying temporarily, we estimate public pension funds, life insurance companies and retail investors remain JPY sellers in 2016, limiting downside risk for USD/JPY. We are neutral on JPY for now, while looking for a good opportunity to renew JPY short positions.

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