ANZ on US dollar positioning and the seasonal pattern in USD versus Asian currencies
ANZ FX Strategy Research argues that risk-reward does not favor selling the USD around its current levels.
"Sentiment against the USD looks too bearish to us. The monetary policy outlook is a key driving force for currency markets. But market participants appear over-eager in chasing the next developed market central bank that could start to tighten.
We remain of the view that a rebound in the USD will come once the liquidity tap starts to turn off or when risk aversion rises. This will see AUD, NZD, and Asian currencies impacted more. We note that in the past few years, USD/Asia has had a tendency to weaken over the first half of the year, before rebounding over the latter half. History may yet repeat itself," ANZ argues.
All in, ANZ recommends staying sidelined on USD For now, and prefers focusing on relative value trades rather than looking for outright long USD plays.
For bank trade ideas, check out eFX Plus.
