📝Expect Dollar to Remain Resilient Into Year-End: Rabobank

Despite the easing of market tensions in early summer, the USD remained on the back foot and was not following the lead of short-term interest rate differentials (Figure 4). This suggests that USD may still have been coming under pressure as asset managers increased their hedging ratios related to existing holdings of US assets. If speculators mistook hedging activity as a sign of structural weakness in the USD into the spring and summer, they may revise this view into the end of the year. The policies of President Trump may have altered the outlook for US exceptionalism in various ways, but they have not changed the fact that the US has the deepest capital markets in the world, it is home to most of the largest tech companies, a huge consumer sector and a flexible and productive labour market. The USD may be facing a setback next year if the FOMC turns dovish under the cloud of political pressure. However, since other regions face growth headwinds of their own, we expect the USD to remain relatively resilient into the tail end of this year. - Rabobank