A Divided Dollar

The report analyzes why the trade-weighted Dollar has weakened despite US equity outperformance, identifying AI-driven equity rallies and FX intervention as temporary distortions. It predicts building Dollar strength and recommends relative-value carry trades.

Key Takeaways

• 1.The recent trade-weighted Dollar weakness is a result of an AI-driven US equity rally rather than a fundamental dislocation.
• 2.The trade-weighted index hides building Dollar appreciation in currencies with low index weights like the PHP, IDR, INR, and CLP.
• 3.Asian FX intervention (JPY and INR) has artificially weighed on the Dollar, but fundamental pressure for strength remains due to higher-for-longer yields and energy shocks.

Table of Contents

• A Divided Dollar
• TRADE IDEAS
• Best Trade Ideas Across Assets
• The G10 FX Strategy Team

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