Is the US dollar selloff nearing an end?

U.S. two-dollar billsPhoto by Leslie Shaffer

The dollar index, which measures the greenback against a basket of currencies, was up at 89.993 as of 3:17 P.M. SGT, off its day’s low of 89.757.

That’s still a fair way from its February high so far of around 90.442, but at least one analyst said the greenback may be finding a floor after its slide from a peak of around 103 in late 2016.

”We may have got to a point where the U.S. dollar has become so significantly stretched from yield spreads that it is resisting further depreciation,” Greg Gibbs, analyst at Amplifying Global FX, said in a note on Friday.

But Gibbs noted that a “significant degree” of U.S. dollar weakness has been unrelated to relative yield advantages, making it hard to predict U.S. dollar moves, which has generated “uncertainty and a pervasive bearishness towards the U.S. dollar that is hard to shake.”

However, UOB noted that a “nascent recovery” in the dollar index overnight to levels around 90.20 was cut short after St. Louis Federal Reserve President James Bullard, a nonvoting member, said that central banks shouldn’t hike rates too aggressively to avoid endangering the broader macroeconomic recovery.

UOB pointed to Bullard’s comment that raising rates by 100 basis points this year, as many economists forecast, “seems a lot to me.”

U.S. two-dollar bills

Photo by Leslie Shaffer