ING Research maintains a constructive bias on the USD through the remainder of the year.
"A risk-on environment is generally seen as a mild dollar negative - as cash leaves from the safety of dollar deposits to be put to work. If this is the case, we would continue to favour the commodity currencies which are enjoying strong terms of trade gains and in the Australian dollar's case could now be supported by the Reserve Bank of Australia's tightening this summer after some strong February jobs data," ING notes.
"But an aggressive Fed should continue to see the dollar perform relatively well too. Dollar gains, however, should be concentrated against the low-yielders. The clearest trend will be a higher USD/JPY, where a dovish Bank of Japan and Japan's large negative income shock from the fossil fuel rally will send USD/JPY to 120 and possibly 125 later this year. We also think the dollar can hold/build on gains against European FX too," ING adds.
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