Arrakis Global
Global Thematic Fund Manager
The US dollar remains an easy long as the Fed turns hawkish, since the only way to control prices now is on the demand side, and that means rates go up. Kashkari's latest comments raise the question of whether the Fed has learned its lesson or is drifting toward Team Transitory 2.0. x.comÂ
The US dollar is supported by hawkish comments from Fed Chair Kevin Warsh, which led traders to sharply increase bets on a rate hike as soon as September. The Dollar Index trades around 99.6 after a sharp rise in the previous session. x.comÂ
The US dollar is becoming a black hole for global liquidity, driven by Fed Chair Kevin Warsh's hawkish stance and a wave of AI-driven capital flowing back into US tech. Net long dollar positions have surged to $29.4 billion. BofA cut its EUR/USD target to 1.15 from 1.20 and now expects three more hikes this year, while Man Group sees another 5% dollar upside by year-end. This is an AI-monopoly story as much as a rate story, with capital leaving stagnant overseas markets to fund US computing. … Show more
The US dollar looks set for a multi-year bear cycle because a multipolar world needs fewer dollars. Reserve managers are diversifying, trade settles in more currencies and central banks accumulate gold instead. Against an equally weighted basket, the dollar's half-century sequence of lower secular highs is topping again on its 7-to-10-year cycle. Every major commodity bull of the past century ran alongside a falling dollar, which could also bring a second inflation wave. x.comÂ
The US dollar should strengthen because rates now price a full Fed hike within the next 12 months. That bid for the dollar would pressure commodities, crypto and long-duration risk assets. The view changes if Fed chair Kevin Warsh clearly signals unwillingness to hike, which he might. x.comÂ
The US dollar should go higher because the Fed will have to hike and oil is rising, keeping a 105 DXY target intact. Long-end yields rose by the equivalent of a rate hike even as the short end fell. Recent weakness looks like a positioning unwind plus a suspected Bank of Japan yen intervention, a 3.5% move in two hours. The 100 range on DXY needs to hold. x.com x.comÂ
The dollar cycle has likely peaked because the Fed's next move is going to be a cut. Supply-shock demand destruction is doing the Fed's job and a strong dollar is doing the rest, so rates should fall, the dollar weaken, and duration assets, commodities and emerging markets reprice. A soon-ish end to the war should work against this view, but even if it drags on much longer, the rates curve has priced it in through the end of 2026. x.comÂ
The US dollar's strength against the yen is a trend, as the Bank of Japan neither wants nor dares to reveal its hand. It is avoiding a clear 160 line and instead trying hit-and-run moves against yen shorts, and it is unclear whether it will actually strike. There is little basis for a sustained yen rally; even if it intervenes, its realistic approach is to fight while retreating, unless Fed policy clearly pivots, and Fed chair Warsh does not seem to want to give markets a clear signal. x.com … Show more
The US dollar looks more bullish than bearish because it is priced against other currencies that are hit harder by oil. Most countries' bond yields are rising, not just America's, and the US has the world's most dominant economy, which AI is accelerating relative to others. Still, trading currencies makes little sense when stocks are rising 25%+ a year. x.comÂ
The US dollar is unlikely to break out in the short term without a catalyst. An in-line PCE print pulled down 2-year and 10-year Treasury yields, the dollar index sits at major resistance at its May 2025 high, USD/JPY at 162 is a critical level for the Bank of Japan to defend, and currencies move slower than bonds. A reopened Strait of Hormuz would also help Europe and the euro recover, adding pressure; that favors short-term longs in gold and emerging markets. x.com x.comÂ
Long-dated US Treasuries benefit from falling long-end yields as the Fed's inflation response becomes a policy error. The Fed looks likely to hike again to defend its credibility despite a supply shock; 5% rates are unsustainable, and current price action points to financial damage followed by a hard pivot. A one-year rate freeze could instead let long yields rise by giving the economy a breather and making later hikes more likely. x.com x.com x.com x.comÂ
