US Dollar Faces New Risks from Overseas Investors

International investors are reassessing their exposure to the US dollar due to growing concerns over US policy signals, which could trigger another wave of dollar selling.

The Euro to US Dollar (EUR/USD) exchange rate has traded near 1.1679 late on Friday, with the euro around 2.43% higher over the past month as fresh US policy concerns kept the dollar under pressure.

Pound Sterling, the Australian dollar and the New Zealand dollar have also remained firmer against the US currency over that period.

According to MUFG, Washington's policy mix has revived the risk that overseas investors increase currency hedges on their US exposure, which could create additional dollar supply even when Treasury yields remain comparatively high.