In his weekly column for FX-MM, Nordine Naam, Senior Forex Analyst at Natixis, looks back at the first quarter of 2017 and explains what’s gone wrong for the dollar since Trump’s election win.
After a strong appreciation in the last quarter of 2016, the US dollar has gone back on the decline against most currencies since the start of 2017. Against a backdrop of rising metal prices and a stable US 10-year interest rate of 2.50%, the dollar has sharply under performed against emerging currencies – which has led to a steady decline in volatility in the foreign exchange market. For example, the currency volatility index (CVIX) has pulled back below 9% to its lowest levels since 2014. Meanwhile, uncertainty over the Brexit negotiations – coupled with signs of a faltering economy – means that the Sterling remains very delicately poised.
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