Forex Flash: USD finds reasons for optimism – UBS

The ECB has all but confirmed a recession in the Eurozone with its staff forecasts on Thursday, while now most investors are reluctant to be on the other side of the BoJ's upcoming activities. The problem is that markets have heard such stories before, and every time the dollar has come back to disappoint as a growth currency. According to Research Analyst Gareth Berry at UBS, “A long-term beta analysis of weekly DXY returns versus MSCI World returns (a broader barometer of global risk appetite) and apart from a brief respite in 2007, the dollar's risk-funder status has been very clear for the last decade.”

Even in 2003 and 2002 when the beta was positive, the DXY was actually declining, along with global stock markets, so applying the term 'growth currency' in a disinflationary environment is more of a misnomer. Nonetheless, there are reasons to say, again, that this time it's different. After all, for now it has worked for USDJPY.