Dollar Downtrend Primed to Kick Back In: 3-Minutes MLIV

Added: 2026-05-31

[00:00:00]You have an eye on the dollar. Does the dollar turn lower if we get a deal to reopen the street? Uh, yeah.

[00:00:08]Morning, Tom. Uh, so we're coming off the back of what's been a good month for the dollar. Uh, but most strategists see that this is with being a positive month in the midst of a downtrend.

[00:00:18]And one of the things that could catalyze that would certainly be a reopening of the Strait of Hormuz and some of that haven, uh, money that is being put in the US currency in recent weeks and months, um, unwinding again.

[00:00:30]But that's not the only reason that people are starting to take a more bearish perspective on the dollar from here.

[00:00:35]It's true, um, that the the the market is moving now to price in fed hikes.

[00:00:40]And the idea that the fed is going to remove that easing bias uh, quite soon.

[00:00:45]Um, but it's also true. Uh the the market isn't really seeing the fed moving until the, you know, early next year.

[00:00:51]And in the meantime, it's expecting that the ECB, the BOE and other major central banks will be raising interest rates faster.

[00:00:58]So that's one reason why people are looking for dollar weakness relative to its major peers, of course. Uh, over here in Asia.

[00:01:05]You know, you're already seeing, uh, signs of that happening with more central banks moving quicker. Yeah.

[00:01:12]Well, let me ask you about that, because in DM world we talk about a 25 basis point rate hike. And m it's significantly more uh, and we've had the likes of the Lincoln Central Bank, uh, raise interest rates by 100 basis points. You've had interest rate raises, uh, come through from Pakistan, from Indonesia as well, to the tune of 50 basis points. How much is that going to go in terms of stabilizing those currencies and those, those those countries currencies which are coming under selling pressure? Is a good question.

[00:01:44]Shimano. And I think in the Asia region, there's two different reasons why, um, central banks are hiking.

[00:01:49]One is because they're worried about, uh, growth and inflation.

[00:01:52]And, and we're seeing that, uh, becoming part of the conversation in the likes of South Korea, maybe Japan as well in Australia and New Zealand, but others that are hiking to sort of protect as a defensive move because the, um, high price of importing oil is really hurting their economy as well as driving up inflation. I think the South, the likes of, um, Sri Lanka, uh, Indonesia, Pakistan, as you mentioned, those are the ones that are moving more aggressively to try to protect the currencies, but actually because they're in this point of distress that's not working so well.

[00:02:21]So most of those currencies are giving back some of the gains that they've taken recently. As the BOJ still hike at its next meeting given the slightly softer than expected inflation out of Tokyo.

[00:02:34]It's it seems imperative for the DOJ to get on with things Tom.

[00:02:37]Uh, you know, it's got, uh, runaway inflation that's really pushing up yields at the back end of the curve. People are starting to question the credibility of the central bank in its ability to control inflation.

[00:02:48]Uh, and also the yen is still on the ropes.

[00:02:50]Right. We'll learn later today exactly how much they spend, uh, defending it and trying to prop it up, but it's already weakened back towards that 160 level. So unless they can signal that there's going to be more hikes, you could see the scenario where even in that weaker dollar, uh, case that we've been talking about, the young still comes under more pressure.