Credit Agricole CIB Research sees a scope for a softer USD over the coming weeks.
"Next to the JPY, the USD has emerged as one of the worst performing G10 currencies so far in October. The development seems to run contrary to the continuing rally of US rates and UST yields in recent days. That being said, a closer look at the spread between the 2Y US swap rate and the average G9 rate would suggest that the USD has been steadily losing rate and bond yield advantage as investors are growing increasingly convinced that other G10 central banks would be more hawkish than the Fed in the coming months," CACIB notes.
"Indeed, growing prospects for tighter monetary policy outside of the US can continue to fuel diversification flows as investors are looking for higher-yielding proxies for the USD," CACIB adds.