The US Dollar Index (DXY) weakened further in January after a sharp sell-off in Q4 last year. Economists at MUFG Bank see a weaker USD but do not expect a linear straight-line weakening trend.
Weaker USD as Fed hiking work nearly complete
“The lion’s share of the tightening has now been completed by the Fed and there are elevated risks of recession as the impact of that tightening begins to play out this year. That is likely to mean the US Dollar weakens this year.”
“High nominal rates, rising real rates and QT will all prove challenging for the markets and will result in volatility and bouts of USD strength as risk aversion sporadically intensifies.”
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