I tend to think that financial flows into tech stocks and US stocks in general are a larger factor driving the US dollar than assumed.
I'm not sure that's the case today because of all the turn-of-the-year flows but it will be something to watch closely if/when the tech tide goes out. The Nasdaq is down 1.7% today. There's a bit of a 'tech smile' in the dollar where if tech goes down moderately, like it did earlier, then the dollar falls, but if it really hits the skids -- like it is now -- then the dollar rallies on risk aversion.
AUD/USD briefly recouped all of yesterday's declines but is now under some fresh pressure.
Another thing to consider with the dollar is global growth. The playbook is that strong EM growth and/or strong global growth is a headwind and I think that's particularly true right now with US valuations so high. There's still a great deal of focus on yield differentials but I just don't think there's that much money chasing bonds across borders, aside from Japan.
What's talked about less is growth differentials. JPMorgan this week had a great chart showing international GDP growth against US GDP growth charted with the dollar. There's a correlation there (as you'd expect) but it's clearer than I would have thought over the long term. More importantly, there are an abundance of reasons to expect the gap to open wider in a USD-negative way in the years ahead.
Finally, keep a close eye on TSLA as it approaches the year-opening gap:
