After depreciating 7% on a trade-weighted basis in 2017, the US dollar has declined a further 1.6% so far this year. What is driving this sharp move lower? The last week move was attributed to the press story regarding a reduction in, or halt to, Chinese purchasing of US Treasuries—although this has since been viewed as more of a political warning sign than an actual investment intention. The most valid explanation in JPM’s view is a rotation in equity market flows in favour of the euro over the US dollar, a trend we saw emerge last year, though there is little hard data to evidence recent buying.

– source: JPM AM

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