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Bilal Hafeez, Research Analyst at Nomura, points out that this year the dollar has in general performed well when risk aversion has picked up.

Key Quotes

“The correlation of the euro or yen (vs the dollar) has been negative with risk aversion, so if risk aversion picks up, those currencies have tended to weaken against the dollar. So as long risk aversion is being driven by Fed policy, then the dollar should remain supported. However, the one potential source of risk aversion that could work against the dollar would be heightened risks on the position of President Trump.”

“The dollar has generally followed the approval rating of President Trump. Recently, his approval rating has fallen, which does not augur well for the dollar. With the Mueller investigation accelerating and a more concerted focus on policy ahead of the mid-term elections – this risk could start to feature more heavily for the dollar.”

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