Dollar could take euro to .05 and yen to 110.00 - Nomura

Analysts at Nomura explained that there is scope for dollar strength to lead to the euro heading to its 2015 lows of 1.05 and USD/JPY rising to 110 – its level before the market gave up on the Fed in June.

Key Quotes:

"One outstanding question, though, is whether too much dollar strength could induce risk aversion or equity weakness, which in turn could lead to the Fed stepping back from any hawkish rhetoric. It certainly has been the case that since the Fed started to taper in 2013 onwards, a strong dollar has eventually led to equity weakness.

If anything the effect has become stronger with time. This likely provides a limit to dollar strength, but both the macro backdrop and flow dynamics are more dollar positive than before, so greater dollar strength could be tolerated than a year ago."