Dollar now in overstretched territory after Trump-fueled rally

Investing.com — The dollar is now in overstretched territory, following its latest Trump-fueled surge, UBS warned on Monday. 

“We caution that the dollar’s valuation appears overstretched at current levels,” analysts at UBS noted in a recent report.

The warning comes after the DXY dollar index rose around 0.5% on Monday to above 106 points, following President-elect Donald Trump’s threats of 100% import tariffs on BRICS nations unless they commit to not developing a joint currency or backing alternatives to the US dollar for international trade.

“The idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is OVER,” Trump wrote in a social media post early Sunday.

The Chinese yuan, Indian rupee, and South African rand fell modestly.

The dollar’s reign as king of the currency playground is likely to continue despite the increasing de-dollarization efforts.

The US dollar dominates financial markets and international trade and is used in over 47% of global payments, the analysts said. The greenback remains on one side of 88% of all trades, making it world’s dominant currency in terms of liquidity. 

“While tensions in the global finance system over the dollar’s dominance will continue, we see little to credibly threaten its reign,” the analysts said.

Well the future for king dollar continues to look bright, over the near term, the analysts recommended investors use periods of USD strength to reduce US dollar exposure.