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Dollar rally faces limits as crude pullback cools bond selling
BBH says widening US-G6 rate differentials can support the USD, but other major central banks’ tightening could cap gains.
FXStreet reports Brown Brothers Harriman analyst Elias Haddad said a pullback in crude oil has eased global bond selling, which has cooled the US dollar rally.
Haddad argued the dollar can still benefit from widening US-G6 interest rate differentials, but tightening by other major central banks is likely to limit policy divergence with the Fed and make it difficult for the USD to hold above its June high.
FXStreet also highlighted that strong foreign demand for US securities partly offsets that constraint, pointing to foreign accumulation of $1,754bn of long-term US securities in the 12 months to July, according to the note.
The brief also linked the softer energy backdrop to developments around oil market expectations, including reports that US and Iranian negotiators were exploring a seven-day deal to reopen the Strait of Hormuz.
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