USD: Returns support limit downside – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong highlights that stronger United States (US) equities and higher Oil prices are creating an unusual risk mix that is keeping US Dollar (USD) weakness contained. The strategist notes that US tech leadership is reinforcing the Dollar’s return advantage. While a softer Dollar later in 2026 is seen as plausible, resilient US growth is expected to cap any sharp USD decline.

US returns anchor Dollar performance

"Oil prices pushed higher, with Brent breaking above USD100/bbl, as attacks on commercial shipping and the continued blockade of the Strait of Hormuz kept diplomacy at an impasse. Mediators are attempting to arrange a US–Iran meeting on Friday, but Iranian officials have signalled talks will not begin until the US lifts the blockade."

"US equities rallied to fresh all-time highs, led by strong tech outperformance. The rebound in global risk appetite has helped unwind the safe haven USD’s March rally. Nonetheless, sustained US equity outperformance through earnings season could still provide near-term support for the USD."

"While recent developments reinforce concerns around erratic US policymaking, we are less convinced by calls for an imminent, accelerating USD sell-off. A softer dollar later this year remains plausible if the US–Iran conflict continues to de-escalate. Even so, resilient US economic performance should limit the scope for any sharp USD decline."

"Overnight price action deviated from the usual geopolitical pattern of higher oil and weaker equities. This unusual mix of firmer oil and stronger risk sentiment supported pro-cyclical, energy-exporting currencies such as the AUD and NOK against the USD. By contrast, weaker euro area consumer confidence—likely reflecting energy shock concerns—and downgraded German growth forecasts weighed on the oil-importing EUR."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)