We think the dollar rally has stalled, not ended

The rally in the dollar seems to have paused this month, and indeed the greenback has fallen against some major currencies – especially those in Europe – this month. We think this largely reflects the rebound in risk sentiment, the stabilisation of commodity prices, and the synchronised rise in government bond yields both in the US and other DMs. While these three factors may prove headwinds for the greenback in the short-term, our view remains that the current global backdrop, on balance, still points to renewed appreciation in the dollar.