Daniel Katzive Doll Quotations

There's more to the dollar weakness this week than just an adjustment in interest rates.

Michigan was a touch below consensus. The dollar may pull back a little, especially against interest-rate-sensitive currencies.

Data has been strong enough heading into year-end to prevent market participants from making strong conclusions on the likely timing of the end of the Fed's tightening cycle, and in this environment the dollar is likely to remain well-supported for now.

We suspect that the end of the Fed tightening cycle as policy tightening continues in the key low-yield economies will leave the dollar increasingly exposed to structural vulnerabilities in the second quarter.

The yen continued to strengthen this morning at the expense of high yielding currencies such as Australian and New Zealand dollars as well as the US dollar.

I think the break of the big level last week ... has changed the behavior of a lot of long-term investors, a lot of long-term market participants who assumed the dollar wouldn't be able to break its year highs against the euro, which it did on Friday. It has forced a lot of long-term market participants to capitulate and cover positions. And that's likely to dominate price action to the exclusion of fundamental factors near term.

The reason the dollar is staying strong is because markets have continued to price in more Fed tightening.

The dollar needs a good global growth backdrop to remain well supported.

The dollar is continuing to respond to the new shift in tone from the FOMC yesterday, and that has continued to work through, not only on the currency market but also on the interest rate and equity markets.

If US data begins to slow markedly in the coming weeks, as our US economics team suspects, the dollar is likely come under renewed pressure.

The FX market is watching interest rate markets and short- end yields have come off and that's because core CPI was tame. For the dollar to continue to do well, you need interest rate expectations to continue to move in its favor, and with a fair amount of tightening already priced in, that's getting harder and harder.