According to analysts at Brown Brothers Harriman, the combination of risk aversion impulses and the eventual revaluation of the risks of the Fed’s monetary tightening will probably see the US dollar continue to recover after the recent correction.
Key Statements:
“Yellen made it clear that US monetary policy officials are not concerned about the strength of the dollar at this time. Specifically, she said that “a market-determined value of the dollar is in the US interest. Currencies are a logical result of different policy stances” as the Treasury directs US exchange rate policy. As we all know, a stronger currency is part of the adjustment process when a central bank tightens and the dollar is no different.
“However, being the world’s reserve currency, this strength can have huge knock-on effects across the planet. There have been tensions in several bordering countries, as well as some of the weaker emerging market countries, but this it is simply out of the hands of US officials. In short: we are nowhere near any kind of Plaza Accord style deal to stop the dollar from rising“.
Source: Fx Street
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