Any gains for the dollar are likely to be sharper against emerging markets and commodities currencies than against the yen and euro.
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The world and financial markets have become messier places in recent weeks.That all ended two months ago when the Bank of Japan moved to negative rates, only to see the yen strengthen against the dollar and share prices drop. Now, after the release of the minutes of the Federal Reserve's April meeting, which clearly suggest that positive economic data are leading the US central bank closer to its second rate hike of this cycle, the currency markets are divided on prospects for the dollar.During the first quarter, the dollar experienced one of the sharpest downturns in 25 years, economists at JPMorgan reckon, due to a renminbi that proved more resilient than expected and stabilising oil, as well as a less hawkish Fed tone.The markets think the Fed may soon raise rates after all, while earlier this week the renminbi fix was set at a five-year low, adding to the dollar bulls' case that the policy divergence trade remains intact after all.Dollar buoyancy may prove more limited than the bulls hope.
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