US: Dollar to be driven by more than just yields – Nomura

While the dollar has staged a recovery over the last few days, analysts at Nomura continue to believe that the broad trend in the dollar will be lower.

Key Quotes

“The dollar weakness we have seen so far this year has been driven by more than just declining US yields. Current accounts matter too – the US appears to be offering too low real yields for the size of its deficits. To square this circle, either the dollar needs to weaken to make US assets more attractive or US yields need to rise or both. This factor has likely exerted residual downward pressure on the dollar. We still expect the Trump administration to pursue a weak dollar policy, and expect US political risks to continue to weigh on the dollar (while the euro area situation continues to improve). We look for general dollar weakness against both the euro and yen.”