OCBC’s Sim Moh Siong and Christopher Wong highlight that recent AI-related equity weakness has boosted safe-haven demand and supported the Dollar.
They now forecast EUR/USD at 1.11 and USD/JPY at 163 by year-end, revising up their US Dollar (USD) outlook from rangebound to modest strength, with US Dollar Index (DXY) seen having 2–3% upside unless Oil or US growth surprise sharply
Revised year-end levels and DXY upside “Hawkish Fed signals lift USD, shifts our view to modest strength from rangebound.” “New USD forecast: EUR/USD at 1.11 (previous: 1.18) and USD/JPY at 163 (previous: 155) by year-end. ” “DXY breakout targets 2 to 3 percent upside; 5 percent move requires oil surge or US overheating scenario. A firmer USD alongside widening rate differentials tends to weigh most on low-yielders such as CHF and JPY.” “Procyclical carry can still perform, but trade resilience will depend on selecting appropriate funding currencies” Author