Caution on extent of USD strength still warranted – MUFG

The US Dollar Index(DXY) advanced by 0.9% in January after weakening by 0.3% in December. Economists at MUFG Bank continue to see scope for further modest dollar strength but they maintain that will reverse later in the year.

USD strength for now

“The focus on the potential for more aggressive tightening by the Fed will likely keep the US dollar supported for now.”

“We remain sceptical of the tightening priced to be delivered which will likely mean the US dollar strength reverses later in the year.”