United States dollar - market update
Chief among FX themes in 2017 was the dramatic weakness of the US dollar. The US Dollar Index’s fall in the last session of the year to 92.3 locked in an annual decline of 9.7% – the index’s worst performance since 2003. And worse is yet to come for the dollar in 2018, according to analysts.
President of Everbank, Chris Gaffney, said in December that he expected “more headwinds” for the US currency despite market expectations for at least two hikes in US interest rates in 2018.
Also in December, a Societe Generale analyst said: “With global growth becoming more balanced…the dollar looks expensive.”
TD Securities said that the macro landscape “should favour a steady depreciation of the dollar in 2018.”
With dollar weakness on the horizon, the most liquid of all dollar FX pairs, EUR/USD, is set to rise to 1.25 in the coming year, thinks UBS, from a Dec ’17 rate of 1.2.
ING sees EUR/USD even higher, at 1.3.
The dollar “will do best of all against the Japanese yen,” said UBS in December.