Recent dollar trading is diverging from USD front-end rate spreads. This isn't the first time the dollar has been detached from its yield advantage over the last year
July and December periods were followed by a turnaround in USD weakness as the dollar softened and detached from rates. This is one factor that could be pushing fair value models to flag the dollar as "cheap"
However, it might be too early for a regression to the mean trade. The gap between the Cable FX Macro USD Index and the USD Spreads Index has widened but is not yet ticking at levels where we have seen the dollar reverse its trend
<.RDDXY-.RDDXYIR> spread last read stands at -32.0 and compares to the one-year average of -20.2, the differential is only 1/2 a standard deviation from its mean
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