The pace of decline in the USD index picked up in July, weakening a further 2.8% and breaking below 94.0. Year to date, the USD index has fallen about 9.2%. In addition to US politics, policy direction continues to provide little support for the global bellwether as Fed chairman Yellen’s slight tweak in the July FOMC on balance sheet reduction was deemed as another opportunity to give the greenback another downward shove. There are some signs of hesitation about pushing Asian currencies to significantly stronger levels than currently. While most will still respond to the US-centric factors in the USD price actions, but some domestic concerns could be kicking in.

Key Points:

• The strength of global growth was the key highlight in the IMF’s latest World Economic Outlook released in July. The obvious change is the upward revision in Eurozone, China, other emerging Asia and even Japan.
• The USD’s directional bias hinges on how much further the Trump discount will go, as the rest of the world experiences a synchronized upswing.
• USD/CNY partially reflects the USD’s softness, but CNY mostly underperforms the non-USD currencies within the basket, keeping the RMB index steady.
• 6.70 is the key USD/CNY support, but could well be breached should the USD index break below key level 92.0.

For full analysis, please download report: Essential Asia: Greenback in the outback (PDF, 677 KB)