Three factors to underpin the US dollar in the near-term – ING

The dollar stays relatively quiet early Tuesday. Economists at ING see three factors that can keep the dollar strong near term and probably send it a little stronger.

Continued dollar strength

“Ongoing energy shock primarily is being felt through natural gas prices. These prices continue to rise as importers compete for cargoes ahead of the northern hemisphere winter and the very uncertain supply situation. The energy independence of the US leaves the dollar relatively insulated on this score.”

“The People's Bank of China (PBoC) overnight fixed USD/CNY in line with model-based estimates. USD/CNH is now trading through 6.80 and a move through 6.82/84 will certainly raise speculation of something larger afoot akin to the April/May 6% renminbi devaluation. That period saw the DXY dollar index up around 6% too.”

“Today sees the release of July industrial production and tomorrow the release of retail sales. We see better figures for both. The figures should temporarily allay US recession fears and prepare the markets for what could be a hawkish set of FOMC minutes tomorrow night. The Fed probably wants tighter financial conditions now – which implicitly include a firmer dollar.”