Credit Agricole CIB Research discusses the USD correlation with risk sentiment.
"The inverse correlation between the USD and risk sentiment has been evident during previous market selloff when investors looked for safety in the vast UST market. The USD’s appeal as a safe haven received a major boost at the start of the Covid-19 global recession in March and April when panicking investors indiscriminately sold assets to get their hands on USD cash. Global markets recovered eventually thanks to the aggressive monetary and fiscal measures announced around the world. The risk rally also meant that the investors started to spend their USD-cash holdings," CACIB notes.
"That said, the USD is still the highest yielding currency in G10 with long USD/CHF and short EUR/USD still the most attractive G10 carry trades based on the 3M risk-adjusted carry...In all, we suspect that the USD could remain relatively resilient as the global uncertainty continues to burnish its appeal as a safe haven with yield," CACIB adds.