USD Index could rally wrongly if financial conditions deteriorate further – ING

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The US Dollar Index, which rose more than 1% on Wednesday, stages a technical correction and trades in negative territory. Confidence crisis may spark the wrong kind of Dollar rally, economists at ING report.

“Expecting another nervous day in FX markets, we suspect investors will want to hang onto defensive trades such as long Japanese Yen on the crosses and probably long Dollar balances in case financial conditions deteriorate further.”

“Expect DXY to remain highly volatile in a 104-106 range – but the upside could come into focus (for the wrong reasons) if stress in the Dollar wholesale funding market were to spike again.”

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