The strength of the U.S. dollar continued undiminished in trading on Monday. The U.S. Dollar Index (DXY), which measures the USD against a basket of currencies (EUR, JPY, GBP, CAD, etc.) broke through the 100 mark. For weekly data, this is the third time this has happened since 2015. The first two times, the Index quickly retreated toward 93. This time, the USD's vigour could propel it higher toward 110. In terms of fundamentals, the rise of the greenback is supported by diverging monetary policies, which can be seen in yield spreads: the spread in 2-year yields between the United States and Germany is at its highest since 2007 and the spread with Japan is at levels unseen since 2008. We continue to think that USD buyers are at risk in the short term. A cautious approach would be to make sure that all your usual hedging needs are met. However, if the rising USD picks up speed, USD sellers will have to keep an eye out for a possible reaction from the Federal Reserve, which has already told us many times that it does not want an overly strong dollar...
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