MUFG Research discusses the current market conditions and flags a scope for further USD gains in the near-term.
"We appear to have reached at least a temporary equilibrium level in FX with the spot market generally trading within narrower trading ranges. That no doubt reflects the same more stable trading conditions in the US Treasury bond market. But this more recent stability could easily give way again and further USD upside over the shortterm is the greater risk at present," MUFG noes.
"We do not believe this window of expected divergence will last but the window remains open for now, and until there is a more notable upturn in expectations of a wider array of countries being through the worst of COVID, growth expectations will remain skewed in favour of the US primarily and some other key countries like Australia, New Zealand and the UK. We would err toward these currencies firstly when positioning for a wider lift in global investor confidence," MUFG adds.