In the view of the analysts at the Hong Kong and Shanghai Banking Corporation (HSBC), the US dollar is poised for further gains, with the key reasons cited below.
“Rates may be moving closer to neutral, but this is not the same as the peak rate. Doubts remain about when and how quickly other central banks will raise rates. Also, the level may matter not just the rate of change.
Eurozone has its structural frailties too, as Italy's tribulations illustrate. Internal Eurozone imbalances are difficult to address. Fiscal issues can open the question of whether the EUR is divisible, while the USD is not.
EM does not offer value and those that are 'cheap' reflect their risk profile. Foreigners still own much of the local market suggesting little clear out and therefore less scope for a rush back in. Macro frailties remain.
The USD has continued to rally on a broader basis, even if this is not fully captured by the DXY. The USD is not expensive on our metrics, and has room to catch-up with these developments.”