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Investing.com -- BofA Global Research reiterated its bearish stance on the U.S. dollar in a note Thursday, even as it acknowledged that the view is becoming increasingly mainstream.
“We remain bearish on the dollar, but recognize this is becoming an increasingly consensus view, posing risks,” analysts wrote.
While BofA continues to expect medium- to long-term weakness in the greenback, the firm outlined several upside risks that could support the dollar in the short term.
“Upside USD risks: ongoing US data resilience, further cooling of trade tensions, & congress finding the fiscal ‘sweet spot,’” the bank stated.
Still, analysts cautioned that those scenarios, while plausible, do not alter the broader trajectory.
“We remain core dollar bears, but near-term upside risks cannot be ignored,” the firm wrote.
The ongoing strength in U.S. economic data remains a key risk to that outlook, even if the trend proves temporary.
“The most likely near-term catalyst for USD upside lies in the ongoing US data resilience or even a reacceleration, even if temporary.”
However, BofA maintained that the longer-term effects of escalating trade tensions would likely weigh on the dollar over time.
“We view the longer-term impacts of a US-induced global trade war as ultimately keeping the USD as the main relief valve for the economy, especially from a starting point of elevated valuations,” the analysts noted.
Ultimately, the bank feels that any short-term gains in the dollar are expected to be fleeting.
“We would expect any near-term USD rallies to ultimately be seen as selling opportunities, barring major policy and economic shifts,” BofA said.