Forex
Home›Forex›Major Pairs›Dollar firms into year-end as Fed risk and volatility…
Dollar firms into year-end as Fed risk and volatility shape FX
OCBC expects only a moderate USD rally into year-end, with elevated bond-market volatility pressuring carry trades and cyclical currencies.
OCBC strategists Sim Moh Siong and Christopher Wong said the US dollar has started Q4 2026 on a firm footing, supported by resilient US growth and lingering hawkish risks from the Federal Reserve.
They added that the tone for the rest of the year is likely to be shaped less by broad rate expectations and more by the transmission of bond-market volatility into foreign exchange, which can affect carry trades and cyclical currencies.
While they cited earlier dollar gains as measured rather than disorderly, the strategists said their base case is for a moderate, not aggressive, USD rally into year-end as markets scale back near-term Fed hike expectations.
They also said if rate volatility stays elevated, pressure on carry trades, cyclical currencies and the EUR is likely to persist, while traditional havens such as CHF and the USD should remain supported.