US dollar likely to maintain strong demand ahead — ING

ING analysts suggest that the recent news of Trump's tariffs being blocked, combined with the Federal Reserve's sentiment to keep interest rates high, could sustain dollar demand in the short term.

While the legal ruling against American duties has been welcomed by the country’s stock markets, it poses bearish implications for US Treasuries. Improved prospects for national GDP growth make it less likely that the Fed will lower rates anytime soon.

Traders are now keeping a close eye on two events: the recent ruling by the US International Trade Court on the legality of the President’s tariffs and the minutes from the FOMC meeting on May 7.

In Asia, the dollar appreciated by approximately 0.5–0.7% amid expectations of Trump exercising more restraint in the trade war following the court's decision deeming the use of emergency powers to enact duties in April illegal.

The Fed believes the dollar's recent sharp decline is mostly due to rising currency hedge ratios, not significant selling of US assets abroad, based on feedback from its market contacts. This assessment mitigates the impact of the currency's drop on the greenback to some extent.