US Dollar Strength

The US Dollar is one of the stronger currencies right now, ranking #3 of eight with a score of +6. Interest rates are the main headwind. At around 3.6%, the US Dollar pays far less than higher-yielding peers like the dollar or pound, which makes it less attractive to carry-seeking capital. Institutional positioning is a clear tailwind — large futures traders are heavily net-long the US Dollar, among the most bullish readings in years. That is strong conviction, though a crowded long can be vulnerable to a squeeze if sentiment turns. The growth picture is moderately supportive, with the labour market in reasonable shape. On a valuation basis, the currency looks stretched versus its own one-year range, which raises the odds of a near-term pullback.