We suspect that the end of the Fed tightening cycle as policy tightening continues in the key low-yield economies will leave the dollar increasingly exposed to structural vulnerabilities in the second quarter.
More Quotes from Daniel Katzive:
I think the break of the big level last week ... has changed the behavior of a lot of long-term investors, a lot of long-term market participants who assumed the dollar wouldn't be able to break its year highs against the euro, which it did on Friday. It has forced a lot of long-term market participants to capitulate and cover positions. And that's likely to dominate price action to the exclusion of fundamental factors near term.Daniel Katzive
The yen continued to strengthen this morning at the expense of high yielding currencies such as Australian and New Zealand dollars as well as the US dollar.
Daniel Katzive
The better tone in global equity markets as crude prices moderate a bit has helped ease risk aversion concerns, to the dollar's benefit.
Daniel Katzive
There's more to the dollar weakness this week than just an adjustment in interest rates.
Daniel Katzive
It's got to be the yen. That is the currency with the lowest yield and borrowers can be comfortable that the BOJ is not going to significantly boost their funding costs over the course of the year.
Daniel Katzive
The data suggests the big momentum positions which had mirrored carry trades have now been cut back to much more neutral levels, which should provide a good backdrop for carry trade rebuilding in the new year.
Daniel Katzive
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