According to Wells Fargo analysts, the US dollar will remain strong early next year, followed by a depreciation during the second half of 2023.. As market participants begin to anticipate eventual US monetary policy easing, they believe the USD will begin a downward trend from mid-2023.
“The dominant theme for most of 2022 was that of the strength of the US dollar. In fact, the Federal Reserve’s trade-weighted dollar index is up nearly 6% since the beginning of 2022. We expect this trend to continue.” dollar strength persists into early 2023 as the US economy remains resilient relative to other large developed economies and the Federal Reserve maintains a more aggressive pace of monetary tightening relative to other major central banks As the Fed plans to hike rates through March 2023, and with most other central banks ending their tightening cycles at a similar time, we think the US dollar index could gain 4-5% more by the end of the first quarter of 2023.”
“But as the Fed ends its tightening cycle and US economic trends worsen, we believe the dollar will enter a period of cyclical depreciation and weaken against most currencies for the remainder of next year. We expect dollar weakness to be broad enough that most G10 currencies, as well as emerging market currencies, could strengthen against the dollar throughout 2023..”
“In that sense, we think 2023 could be ripe for EM currencies to not only rally against the US dollar, but also outperform G10 currencies.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
