OCBC strategists expect gradual USD gains by year-end, driven by yield advantage and risk aversion amid Fed hawkishness.
The US Dollar (USD) remains supported by its yield advantage and safe-haven status, aligning with the USD smile framework. Strategists note the currency outperforms during strong US growth or heightened global risk aversion, with modest appreciation expected by year-end.
Near-term upside is seen as incremental without fresh catalysts, keeping carry trades attractive. Fed officials, including Dallas Fed President Logan, have signaled a preference for modestly higher rates to balance risks, reinforcing the USD’s resilience.
Overnight moves reflected this dynamic, as the USD held gains despite partial retracement in US yields. Renewed Middle East tensions further bolstered demand for the greenback as investors turned defensive.