Dollar seen losing further ground in H220 – UOB

FXStreet reports that strategists at UOB Group’s Quarterly Global Outlook 3Q 2020 believe the greenback could shed further ground as global recovery advances in the second half of the year.

“It would appear that USD has peaked in March. Within the Majors, risk currencies such as AUD and NZD rebounded ferociously against the USD in the 2Q and completed the V-shaped recovery from March’s lows. EUR/USD mustered enough momentum from hopes of a euro-area recovery fund to push above its key resistance at 1.10 in end-May. Overall, across the 2Q, we have seen the mighty USD lose its shine and the US Dollar Index (DXY) appears to have topped out in March at 103 as it pulled back towards 96 as of mid-June. Except for the IDR and THB, gains in the Asian FX against the USD in 2Q were more measured compared to the Majors. Concerns of the increasingly strained US-China relationship prevented a bigger recovery in most Asia emerging FX which otherwise would be sensitive to any pickup in global risk appetite. Also, most of emerging Asia are still nursing quarter- and year-to-date investor outflows in their respective stock and bond markets.”

“Going forward, we continue to see this gradual pullback in the USD. FX Majors like the EUR and AUD, are expected to consolidate recent gains against USD in the second half, amidst an on-going bumpy global recovery. Asian FX is expected to make further gains against the USD, but at a more sustainable pace with the CNY and South East Asian currencies leading the way to a firmer recovery in the second half. The key caveat to our broad view of gradual USD weakness from here on is a resurgent 2nd wave of infections could easily upend the relative stability financial markets are enjoying now and bring about a fresh bout of volatility leading to renewed USD strength yet again. We continue to urge investors to practice prudent risk management decisions in this brave new COVID-19 world.”