MUFG Research discusses the current conditions of the FX market and notes that fundamental-based trades are not prone to perform in the current market environment.
"We are sceptical though of playing the FX markets from a relative fundamental stance just yet. Fundamentals will of course come more into play in time but only after the positioning stress is relieved and the extreme illiquidity problems subside. When that does happen and we may be weeks or even longer from that the dollar will certainly revert the gains made since the escalation of this crisis," MUFG notes.
"From the turning point in the Global Financial Crisis (March 2009), the US dollar (DXY) reversed nearly all the crisis-fuelled USD demand in about 8 months,"MUFG adds.