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15 May 2013
Forex Flash: USD attempting to break higher - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the outperformance of the US dollar has extended further early this week with strength most evident against high beta currencies such as the Australian and New Zealand dollars.
He feels that the US dollar appears to be attempting to break higher in the near-term driven by building expectations that the Fed will taper the pace of QE in the second half of the year. He feels that a tightening in global liquidity conditions would likely weigh heavily upon high beta currencies whose values have been distorted by loose liquidity with both the Australian and New Zealand dollars still highly overvalued. Further, he feels that the correction lower for the Australian dollar is well overdue given the ongoing slowdown in growth in China, however, it could still prove that the market is currently expecting the Fed to pare back QE too prematurely which is exaggerating US dollar strength in the nearterm. In contrast Hardman comments that the yen continues to under perform with Abenomics still helping to lift market based inflation expectations and driving portfolio rebalancing amongst Japanese investors into riskier assets.
He feels that the US dollar appears to be attempting to break higher in the near-term driven by building expectations that the Fed will taper the pace of QE in the second half of the year. He feels that a tightening in global liquidity conditions would likely weigh heavily upon high beta currencies whose values have been distorted by loose liquidity with both the Australian and New Zealand dollars still highly overvalued. Further, he feels that the correction lower for the Australian dollar is well overdue given the ongoing slowdown in growth in China, however, it could still prove that the market is currently expecting the Fed to pare back QE too prematurely which is exaggerating US dollar strength in the nearterm. In contrast Hardman comments that the yen continues to under perform with Abenomics still helping to lift market based inflation expectations and driving portfolio rebalancing amongst Japanese investors into riskier assets.