USD correction lower most likely temporary but risk it extends further in near-term – MUFG

The USD has corrected lower over the past week with weakness broad-based. Economists are not yet convinced that the tide has turned convincingly against a stronger USD, however, the correction lower could extend further in the near-term.

A setback for the USD

“We are not convinced yet that there has been a significant shift in fundamentals to justify a sustained reversal lower for the USD.” 

“Many of the drivers behind USD strength remain in place including a Fed that is still committed to faster policy tightening and more acute downside risks to growth outside of the US. While we do expect both of these drivers to turn less supportive for the USD later this year, we believe it is premature for the USD to have already peaked out.”