Dollar to come under growing pressure

Our view on the USD for 2019 was that it would face modest downwards pressure. The pressure has been modest, but it has been to the upside. Nonetheless, overall the dollar (DXY) has been in a tight range this year (~4.5%). Every attempt to the upside has been met by...

Dollar Very Stretched to the Downside

The DXY index has fallen in a straight line this year, with the Sharpe ratio of the YTD move at almost 2.4. Although we have been bearish on the dollar from a macro point of view since last year, the dollar does look vulnerable at present to a short squeeze. The top...

Stronger Dollar Toxic for Emerging Markets

In the past few monthlies we’ve warned that a strong dollar has the potential to cause emerging market crises.  From a valuation standpoint, the dollar is very overvalued against almost all currencies, but rising interest rates and the appreciating momentum may drive...

Greatest Risk to EM is a Higher Dollar

(from our Tactical report of 8th November 2016) Flows to EM equities have been high lately (3m flows over last 2 years to EM ETFs are in their 80th percentile – chart below). Source: Macrobond, Bloomberg and Variant Perception The rise in the USD is a risk to these...

USD to Continue Weakening Bias as Risk Recedes

Brexit predictably caused the USD to rally, as any global risk-off episode will do.  However, we reiterate our view that the USD will have a tendency to weaken, after the current rally dies out (which it already appears to be doing, with the DXY basically going...

USD Positioning Supports Weaker Dollar

In January and February we discussed our view that we thought the dollar would find it difficult to rally further and would instead display a modest weakening bias.  The initial leg up of the rally in 2014 was not due to higher yield differentials with the US, or the...