MUFG Research sees a scope for further USD gains on the back of long-term yield spread.
"The long-term yield spread between German Bunds and US Treasuries continues to widen reaching 175 basis points. The spread is moving back closer to pre-pandemic levels from February when it was trading closer to 200 basis points and is now well above levels from during last summer when it was trading between 100 and 120 basis points," MUFG notes.
"The Fed’s greater tolerance for allowing higher yields than the ECB’s could be contributing to the widening yield spread in the near-term. In contrast, the ECB has clearly expressed more concern over rising European yields.. The developments are offering more support for the US dollar in the near-term," MUFG adds