Momentum in the USD likely to persist into year-end – Nomura

Nomura Global FX Strategy team sees the bullish momentum in the US dollar persisting into year end, although it does see Yen and Euro strengthen if Trump wins elections.

Key quotes

We see the momentum in the USD persisting into year-end as an improving US outlook and the removal of domestic uncertainty brings the Fed back into focus.

This dollar strength, however, should not crowd out the increased inflows into the EM space (so we believe EM will still do well on a base-case outcome of Clinton win as hedges come off).

However on a Trump win, even though the dollar would outperform vs EM currencies, the euro and yen (and to a certain extent, even gold) would be major recipients of the flight-to-quality moves (in addition to USTs) over concerns of where to place large sums of capital as we await the convergence of his policies with reality.