First, by the beginning of the summer, based on its 13-week rate-of-change measure, the dollar index had reached overbought levels. Faced with this hurdle, the dollar's rally essentially took a pause, with the DXY rising only…
Three key risks could invalidate our thesis that the dollar strengthens this fall. The first and most obvious one is that speculators have already aggressively bought the dollar. This makes the greenback vulnerable to any…
Highlights Historically, the dollar exhibits positive seasonality in October and November. Technical and valuation indicators suggest that this year will be no exception. Continuing divergence between U.S. and global growth, rising…
Please note that a Special Alert titled "Brazil: A Regime Shift?" discussing investment implications of the weekend elections was published on Tuesday. Highlights The combination of rising U.S. bond yields and slumping…
Jair Bolsonaro, an ex-army captain and a right-leaning, law-and-order candidate has won a surprising victory in the first round of the Brazilian presidential election (Chart I-1). Bolsonaro came within striking distance of 50%, but did…
Highlights Heightening geopolitical tensions between the U.S. and China, higher U.S. bond yields, tightening U.S. dollar liquidity and weakening EM/China growth - all combined - constitute a bitter cocktail for EM. Barring a…
Eighty percent of EM foreign-currency debt is denominated in dollars. Outside of China, EM dollar debt is now back to late-1990s levels, as a share of both GDP and exports. The large stock of EM local-currency debt issued in…
Our foreign exchange strategists analyze the properties of carry strategies by constructing a Carry Strategy Index as follows: Ranking the 10 countries in the G10 according to their 3-month interest rate. Using the 3-…
Highlights Recommended Allocation We don't see any change over the next six to 12 months to the current trends of strong U.S. growth, continuing Fed hikes, rising long-term interest rates, and an appreciating dollar. We…