The dollar remains broadly unchanged on the year so far, but we continue to think that it (and the yen) will rally over the second half of the year as the long-anticipated recessions finally takes hold in the US and other advanced economies, driving a deterioration in risk sentiment and increase in safe-haven demand. Although the yen has (surprisingly) weakened in the wake of the BoJ effectively ending its Yield Curve Control policy, we think that is another development which strengthens the case for a rebound in the yen. In addition, while the US economy is showing signs of fatigue it looks in better shape than the main European and Asian economies, which also suggests the dollar is likely to outperform over the coming months.
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