USD: benefits from risk aversion as volatility picks up - Scotiabank

Analysts at Scotiabank explained that, overall, the USD is doing somewhat better, with the DXY making back much of the ground lost on the Fed policy statement/lower dot plot.

Key Quotes:

"Broader market volatility is picking up but the USD is benefiting from risk aversion.

US short-term yields continue to slip (US 2Y bond yields have dropped nearly 25 bps since the end of May) and USD-supportive yield spreads have compressed.

But the USD retains a yield significant advantage generally and, with the Fed still telling us it will tighten twice this year, we continue to expect the USD to strengthen.