The US dollar traded in a modest 4% range in recent months. Bouts of USD strength have been driven by market participants pricing several 25 basis point interest rate increases by the Federal Reserve.
But the recent string of soft US economic data and particularly the Japanese yen intervention weighed on the dollar.
We still expect the USD to increase solidly over the next two to three quarters because we expect the Federal Reserve to increase the funds rate by more than is priced by market participants.