Forex Flash: US yields, funding status breaks USD vs stocks pattern - Wells Fargo

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FXstreet.com (Barcelona) - The greenback has taken an interesting turn during early 2012, divorcing from a pattern observed in recent years, where greenback strength meant equities weakening and viceversa.

In assessing the dollar's drivers, Nick Bennenbroek, Head of Currency Strategy at Wells Fargo, notes that the greenback has displayed a relatively sturdy and stable relationship with the government bond yield spreads. "Accordingly, resilient U.S. data and rising U.S. yields have likely been one factor supporting the greenback" he says.

More significantly, "the U.S. dollar increase in competition as a funding currency since late last year is also an important factor explaining the dollar's more favorable performance during episodes of rising risk appetites and equity strength in recent months" Nick expalins.

"At this point, our bias remains for gains in the U.S. dollar versus the euro, yen and pound, and we favor hedging receivables for those core major currencies at current levels" the analyst concludes.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Forex and Currencies

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