US Dollar vulnerable to further weakness in the near-term – MUFG

The US Dollar Index hit an intra-day low yesterday of 102.94. In the view of economists at MUFG Bank, the greenback is prone to suffer further losses barring strong US inflation data.

Fed policy outlook in focus 

“Fed officials are still sticking to their updated guidance that rates are likely to rise above 5.00% this year in order to fully get on top upside inflation risks. That was still the message yesterday both from Atlanta Fed President Bostic and San Francisco Fed President Daly.”

“The US rate market though it still pricing in a terminal rate below 5.00% encouraged by recent softer US inflation, wage data and leading indicators for activity that market participants anticipate will eventually prompt the Fed to dial back their rate hike plans in the coming months.” 

“Unless market expectations are challenged by the stronger incoming data, it leaves the US Dollar vulnerable to further weakness in the near-term.”