Dollar: Event-Driven Risks Shape Devaluation Narrative — MUFG

The dollar remains broadly stable, but market sentiment is being shaped by event-driven risks. MUFG analyst Derek Halpenny notes that with investors focusing on potential U.S. Treasury actions to curb rising long-term yields, and as discussions of dollar devaluation regain traction, the dollar's outlook is tilting negative. As of writing, the U.S. Dollar Index (DXY), which measures the dollar against a basket of major currencies, is trading near 98.97.

**Key Figures' Remarks Act as a Catalyst**

The two core events recently influencing dollar sentiment are both tied to remarks from senior U.S. officials. One is the economic "D-Day" plan targeting Iran proposed by U.S. Treasury Secretary Scott Bessent, which has triggered a fresh round of market assessments of geopolitical risks and their implications. The other is a speech by former Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium. Halpenny emphasized that the combined impact of these events has been pivotal in shaping the recent dollar devaluation narrative, noting that risks are skewed to the downside.

**Risk Sentiment Recovers but on Fragile Ground**

Although optimism over a potential end to conflicts briefly improved risk sentiment, this recovery appears unstable. MUFG believes that the event-driven logic implies that once these supporting factors fade or reverse, dollar weakness could resurface. Against this backdrop, the dollar index is hovering near multi-year lows, with markets closely monitoring subsequent policy signals and geopolitical developments for clues on a directional breakout.