Market Analysis

US Dollar at a yearly lows

FOREX

The US dollar is approaching yearly lows during early Tuesday trading. This greenback weakness results from the very low interest rates set by the Fed, which in turn led to an increase in short selling of the dollar as flows to other currencies increased. Since the beginning of the year this dynamic has been disrupted by an emerging sentiment amongst investors that the current dovish stance of the Fed could be opening the door for the return of inflation, a scenario that would be likely to force the central bank to bring forward the timing of the tapering. However, Fed officials have been working hard to sell the idea that any inflationary pressures won’t last and therefore there is no reason for the central bank to deviate from the current dot plot while the economy is still recovering. As markets appear to be buying into this narrative, there may be scope for further dollar losses ahead.

Ricardo EvangelistaSenior analyst, ActivTrades

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