The dollar is expected to remain strong against most major currencies through the end of the year, according to a Reuters survey of forex strategists. Experts believe that the robust U.S. economy and rising Treasury yields, which are among the highest in developed nations, will continue to contribute to the dollar’s resilience.
A Strong Year For The Dollar
The U.S. dollar has rebounded impressively, gaining over 1% this year, largely because of concerns about China’s economic stability and global growth. The strong performance has made analysts reconsider previous predictions of a weakening dollar in the short to medium term.
According to a Reuters poll conducted from Sept. 1-6, a decisive 81% of analysts — 43 out of 53 — believe the dollar has more room to grow, signaling that the risks are tilted toward further strengthening.
“We think dollar strength has got further to run and will sustain over the next three months,” said Jane Foley, head of FX strategy at Rabobank.
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Shifting Interest Rate Landscape
The outlook could change approaching next year. The consensus among around 70 foreign exchange strategists is that the dollar will begin to weaken slightly against most major currencies. This change is expected to coincide with the Federal Reserve initiating interest rate cuts.
“In the next six to nine months, we are expecting the Fed to start to cut rates and it’s at that point where we think that the dollar will reweaken again,” said Lee Hardman, senior currency analyst at MUFG.
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Major Currencies: A Mixed Bag
As far as other major currencies are concerned, forex strategists predict varying levels of growth and losses through the end of 2023 and into 2024.
The Euro
Despite its stagnant growth outlook, the euro is expected to appreciate modestly, trading 1.7% higher at $1.09 in the next three months. Longer term, it’s forecasted to climb to $1.10 in six months and $1.12 in a year.
The Japanese Yen
The yen, which has lost over 11% against the dollar this year, is projected to recover its losses, trading at 132/dollar within the next 12 months.
The British Pound
Sterling, which has already appreciated nearly 3.5% in 2023, is forecast to gain another 3% and reach $1.29 within a year.
Asian Currencies
Asian currencies face an uphill battle to recover their losses against the dollar. The Reuters poll suggests they will, at best, maintain their current levels or appreciate slightly in the coming months.
Latin American Currencies
In Latin America, the Brazilian real and the Mexican peso, which have gained around 6% and 12%, respectively, against the dollar this year, are expected to depreciate slightly by year-end.
The Argentine Peso
The Argentine peso is in a precarious situation, having lost 50% of its value against the dollar this year. The poll indicates that it could face another significant devaluation, dropping an additional 17% by the end of November.
Overall, the U.S. dollar is expected to remain strong in the short term but may start to falter as the Federal Reserve considers rate cuts next year. The fate of other currencies remains varied and influenced by economic factors unique to their respective regions.
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