Both the euro and the yen had roller-coaster weeks against the US dollar amid rising market volatility. What’s next?
Here is their view, courtesy of eFXnews:
ING Research discusses the USD outlook by looking at the divergence in US yields and the USD performance, and notes the following key points.
†i) this year’s rise in Treasury yields look to have been driven more by the term premium and embodying US fiscal risks, thus a weaker dollar is the cost of financing larger deficits,
ii) the recent sharp adjustment in correlations happens rarely and on average has seen USD/JPY decline 6% over a subsequent 3 month period,†ING notes.
“We have medium term fair value calculations for EUR/USD and USD/JPY at 1.22 and 104 respectively. However, we believe the dollar risk premium can see the dollar extend into undervalued territory and currently have conservative year-end targets for the two pairs at 1.30 and 100,†ING argues.Â
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