US Dollar: Modestly stronger into year-end – OCBC
OCBC strategists Sim Moh Siong and Christopher Wong highlight that the US Dollar (USD) stayed resilient despite improved risk appetite, supported by hawkish Federal Reserve (Fed) commentary that limited the drop in US front-end yields.
OCBC analysts Sim Moh Siong and Christopher Wong predict a modestly stronger US Dollar (USD) through year-end, despite improved risk sentiment and hawkish Federal Reserve commentary. They attribute the resilience to persistent Fed tightening risks and ongoing challenges for European currencies, while equities rally on tech strength and geopolitical concerns ease.
The USD traded mixed rather than weaker despite fading safe-haven demand, with improved risk sentiment driven by US-China discussions, lower oil prices, and easing supply concerns. While European yields declined, hawkish Fed statements limited the drop in US front-end yields, supporting the USD. However, a more substantial USD rally would necessitate evidence of demand-driven inflation.
The outlook also considers the challenges faced by the euro, driven by fiscal concerns and elevated energy costs, and the gradual appreciation of the Chinese Yuan against the USD. Meanwhile, the Japanese Yen could see improvement if Japan's policy environment becomes more supportive, and the Trump-Xi summit looms later this week, adding to the focus on the USD.
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