Basically November has been characterised by “surprising” dollar strength — everyone and their cousin knew the dollar was supposed to zoom towards toilet-papers status — and some air coming out of global commodity and equity markets.
But is this trend still in its early innings?
Here’s Morgan Stanley on dollar trading:
After seeing USD selling for eight weeks in a row, our aggregate net flows turned and saw net buying on the week. Bigger picture, our clients are still very short, having sold the dollar for 22 out of the past 25 weeks. While we have already seen the leveraged community turn sentiment about a month ago, it is quite notable that the non-leveraged community were net buyers of USD on the week. Prior to this, they had sold USD for 14 out of the past 15 weeks. Should this become a broad shift in sentiment rather than a blip in trend, flow will likely be quite supportive for USD going forward.