We think the US dollar is strong, but could rise further

The US dollar remains somewhat above its “fair” value on most of the metrics we track. But its overvaluation is not extreme by historical standards, nor is that of many other currencies, and we do not think that it will prevent the greenback from rising a bit further over the next 6-12 months.
Jonas Goltermann Senior Markets Economist
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FX Markets Weekly Wrap

COVID throws another curveball

News late yesterday of a new and potentially more dangerous variant of COVID-19 emerging in South Africa has made a dramatic impact on financial markets today. In general, market shifts have been similar to those in previous periods of renewed uncertainty around the path of the pandemic. Risky assets and currencies have fallen across the board today, while bond yields have dropped sharply and safe havens – notably the yen – have rallied. Short-term rate expectations, which had risen significantly in the US and other DMs over recent months, have been pared back rapidly.

26 November 2021

FX Markets Weekly Wrap

Continued dollar rally looks increasingly likely

The US dollar is set to end another week higher against nearly all major currencies. To a large extent, this latest rally appears to be driven by the rise in short-term government bond yields in the US relative to other major economies, notably the euro-zone. And today’s news about renewed lockdowns in parts of Europe has reinforced growing concerns about the pace of the global economic recovery. Given our view that global growth will continue to slow and inflationary pressures in the US will prove more sustained than widely anticipated, the backdrop remains favourable for the dollar to strengthen further. Indeed, the minutes of the FOMC’s last meeting (due Wednesday) could lend support to this view.

19 November 2021

FX Markets Chart Book

US dollar bull market might just be getting started

The dollar has risen to its strongest level in more than a year and, though it is not our central forecast, we think the risk of a more sustained dollar bull market is increasing.

19 November 2021

More from Jonas Goltermann

FX Markets Weekly Wrap

Dollar rally continues as Jackson Hole approaches

The US dollar has risen sharply this week, reaching its highest level of the year as continued fears about the spread of the “delta” variant and further evidence of growing risks in China (around its economic slowdown, the widening regulatory crackdown on major tech firms, and concerns about its opaque financial system) have weighed on risk appetite and increased demand for safe havens. While we continue to forecast a robust economic recovery, the near-term risks in financial markets appear skewed to the downside, which may well continue to support the greenback.

20 August 2021

Capital Daily

COVID remains a key risk for the Kiwi

The RBNZ’s decision to delay raising interest rates highlights how the spread of COVID-19, and governments’ responses to it, has returned as a key driver in financial markets over the past couple of months. Nonetheless, unless the outbreak in New Zealand worsens significantly, we continue to expect the RBNZ to hike rates sooner and faster than most other G10 central banks, leading to higher bond yields and a resilient Kiwi.

18 August 2021

FX Markets Update

What would it take to generate a much stronger US dollar?

We think that the upside risks to our US dollar view have increased. On a trade-weighted basis, we forecast a ~4% rise from its current level by the end of 2022; this Update considers what factors might deliver a more significant (10%+) rally in the greenback over the next 6-18 months. China slowdown webinar: Join us on Thursday, 5th August for a special webinar assessing the impact of China’s economic slowdown on the global recovery. Neil Shearing will lead a discussion with economists from across our economics and markets services to assess whether investors should brace for fresh volatility with China poised for a structural deceleration. Register here for sessions at 0900 BST/1600 HKT or 1100 ET/1600 BST.

4 August 2021
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