DXY is giving back this year’s gains – DBS
|The Dollar Index (DXY) is within striking distance of returning this year’s gains, DBS Senior FX Strategist Philip Wee notes.
Weak USD bias ahead of Jackson Hole
“In depreciating a third session by 0.4% to 101.44, the DXY is converging to 101.33 or level at the end of 2023. The DXY’s decline is consistent with the US Treasury 10Y yield dropping farther below 3.88% or 2023’s closing level. The 10Y yield eased for the third session by 6.5 bps to 3.807% overnight.”
“The Greenback has been under pressure from the Fed flagging a rate cut at the FOMC meeting this September. At its Jackson Hole Symposium on August 22-24, the Fed will likely push back recession fears in favour of a soft landing in the US economy.”
“We view the rate reduction as removing top-level restriction to support the Fed’s full employment mandate now that the inflation has fallen significantly from its peak and below the Fed Funds Rate. The shift towards generalised USD weakness was also evident in the appreciation of the AUD and GBP amid more unwinding of yen carry positions reported by the CFTC.”
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