Further Dollar Selloff Awaits Further Fed Guidance - BofA
JustinThe U.S. dollar has rebounded over the last few days, and the return of the market's bearish stance would need guidance from the Federal reserve, according to analysts from Bank of America Securities.
Investing.com - The U.S. dollar has rebounded over the last few days, and the return of the market's bearish stance would need guidance from the Federal reserve, according to analysts from Bank of America Securities.
At 08:55 ET (13:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 97.400, after jumping 1.5% over the last couple of trading sessions.
That said, the index is still almost 1% lower year-to-date, and down approaching 10% over the last 12 months.
The greenback received a boost after U.S. President Donald Trump nominated Kevin Warsh as his pick to be the next Fed chief at the end of last week, with the market expecting he will be less likely to press for rapid rate cuts than some other candidates, while also seeking a reduction in the Fed's balance sheet.
"Overall, the latest USD directional quant signals show signs of improvements. Option skews in major USD/G10 pairs turned in favor of the greenback amid a broad-based pick-up in implied vol levels," said analysts at BofA, in a note dated Jan. 2.
The size of commodity selloff triggered the move higher, and would also argue against chasing the dollar lower for now, the bank added.
"Some further Fed guidance on policy rate and balance sheet under the next Chair would likely be needed for the FX market to re-engage with the next major USD move, in our view," BofA added.
