Dollar Resilience Supported by Sticky Inflation and Hawkish Fed Bias

According to OCBC Bank strategists Sim Moh Siong and Christopher Wong, the US dollar's resilience is supported by policy reality. They argue that Treasury buybacks are unlikely to trigger sustained dollar weakness without clear Federal Reserve support to cap yields.

The strategists point out that sticky US inflation and resilient growth underpin a hawkish Fed bias, limiting the scope for fiscal-monetary coordination. The July core PCE inflation rate rose 0.2% MoM and 3.3% YoY, in line with expectations, but annual price pressures remain high.

OCBC prefers to stay neutral on the USD, noting that a meaningful dollar weakness would require evidence of Fed support for Treasury efforts to keep yields contained. The strategists also suggest that Chair Warsh's comments at Jackson Hole could reinforce the Fed's inflation-fighting commitment and provide support for the dollar.