After another volatile few days across financial markets, the US dollar looks set to end the week lower against most major currencies. Given the renewed falls in “risky” assets, that is arguably somewhat surprising: the dollar generally does well when risk sentiment worsens. The simplest explanation, as we suggested last week, is that currency markets tend to mean revert, especially following large and rapid moves. After its recent rally, the dollar was due a pause. The key question now is how long that pause lasts.
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