Dollar Index: 2008/09 parallels point to sustained USD strength – Westpac
|Late-2008/2009 offers a highly relevant historical analogue for the near term USD outlook, Richard Franulovich from Westpac Institutional Bank reports.
Key quotes
“The parallels with recent USD price action are obvious; the DXY squeezed 9% higher over a more compressed two week period by 20th March, only to give back roughly half those gains by month’s end, reflecting broad global policy relief and an easing in USD-funding scarcity.”
“But if late 2008/2009 is any guide the USD is likely to stabilise soon and resume a broadly strong tone. Back in 2008/09, once the initial USD squeeze and partial reversal were complete, the USD subsequently regained its footing and held solid well into mid-2009.”
“If that scenario plays out again in 2020 that would imply currencies are on the cusp of once again broadly track in line with their sensitivity to risk aversion.”
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