USD Index to drift lower to the 100 area – ING

The Dollar has broken to new lows for the year. Economists at ING expect the US Dollar Index (DXY) to dip toward 100 level.

Lower volatility will support the carry trade

“Positioning is probably the biggest factor preventing a further Dollar decline right now, but the benign macro story does favour DXY continuing to drift lower to the 100 area.” 

“Lower volatility in the rates space will be feeding into lower FX volatility. Assuming no major fireworks from today's ECB/BoE meeting or tomorrow's US jobs report, lower volatility will support the carry trade. Here, we like the Mexican Peso where high risk-adjusted carry and, unlike the CEE high yielders, positive real interest rates should keep the MXN very much in demand.”