In this PERSPECTIVES Viewpoint FX: Headwinds for the USD persist, we address the recent shift in focus from monetary policy decisions to the fiscal and trade policies of the US and the likely near-term developments in this regard. We also provide our outlook for the USD and a number of other currencies.

 

Key takeaways:

  • The USD has suffered due to tariff policy and increasing fiscal concerns. The EUR, on the contrary, is benefiting from the plans for fiscal stimulus and the diversification from USD.
  • The Bank of Japan (BoJ) is working only slowly on monetary normalisation due to the uncertainties that the current trade talks bring. The JPY should appreciate in the medium term.
  • Despite the US tariffs on imports from China, the CNY strengthened recently and rose to a 7-month high against the USD. Beijing is supporting measures to further internationalise trade with the renminbi (RMB).

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