US Dollar: August weakness seen persisting – DBS

DBS Group Research economist Philip Wee argues that the Dollar’s outlook in August is weak after a sharp stumble at the end of July. He highlights a reluctant Federal Reserve under Chairman Kevin Warsh, coordinated US-Japan currency intervention in USD/JPY, and a cooler Middle East geopolitical backdrop as factors keeping the USD vulnerable.

Fed stance and interventions weigh

"The greenback’s trajectory looks bleak in August after stumbling badly at the end of July."

"The confluence of a Fed seemingly reluctant to hike, coordinated US-Japan currency interventions, and a cooling geopolitical landscape in the Middle East keeps the USD vulnerable."

"First, Fed Chairman Kevin Warsh has unsettled investors who had amassed long USD positions betting on his hawkish credentials."

"Instead of signalling that rates may rise, Warsh used the July 28-29 FOMC meeting to focus on institutional reforms, especially scaling back forward guidance."

"Rather than reinforcing the USD, the resulting steepening in the US Treasury yield curve reflected fading confidence in US monetary policy."

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