The strength in the US dollar comes primarily from the contagion concerns surrounding Turkey, said Khoon Goh, senior forex strategist at ANZ Research.
“The lira has touched all-time lows on the back of the US sanctions and that sparked concerns about European banks’ exposure to Turkey. So that seen the euro weaken and breaking the key 115 support level which has led to strength in the US dollar,” said Goh.
“Where do we go from here really depends on how concrete this contagion or spillover effects are. If we see further weakness and some sheer signs that European banks could be hit by the exposure to Turkey then we could well see further strengthening in dollar over the weeks ahead,” Goh further mentioned.
Talking about the Turkish situation, he said, “I don’t expect that as a contagion effect simply because the situation in Turkey isn’t exactly new, we have known about this and Turkish lira has been weakening quite consistently throughout this year.”