Forecasts for the US dollar change all the time, affected by news events and relative sentiment towards the US economy. This continually updated article reviews the latest forecasts from banks and FX experts as well as news and recent movements of USD in the currency markets.
What’s in this US dollar forecast summary?
This trend is seemingly continuing into 2022 although with a slight hiccup for the greenback mid January with Mr Powell’s confirmation hearing testimony disappointing the markets about the imminence of rate hikes.
You can also read our full Foreign Exchange Guide to the United states.
The US dollar is the most popular reserve currency so whether the USD rises or falls in the future is a difficult question and the answer depends on many factors.
A good way to consider the US dollar’s current relative value is to look at the recent US Dollar Index which measures the USD value against a range of peer currencies.
The following sections show a summary of trends and forecasts for popular US dollar exchange cross rates:
The Ukrainian crisis and its risks for European energy supplies have pushed the euro down towards 1.12 against the US dollar late January.
After the yield advantage is expected to continue favouring the USD, there will be sustained pressure on the single currency through near-term as expectations for Fed policy become ever more aggressive.
For the euro 2021 was a poor year against the greenback. At the start of last year EUR/USD was at the 1.2200 level ($1=.82€) but by June was being solidly sold off eventually finishing at 1.1300 by year end ($1=.89€).
But to be fair, the market’s expectation for a rise in US inflation and thus interest rates has pushed up the USD exchange rate against most currencies.
The Aussie dollar hit a recent high near 0.755 USD in late October but then dropped back to 0.70 into December. The catalyst was a successfully dovish Reserve Bank of Australia. The RBA reiterated that it doesn’t see rate hikes until 2024, as wages are expected to increase only moderately. Into the new year 2022 the Aussie has risen back to 0.72 against the greenback.
The Ukrainian crisis and the risk-off market have pushed the Canadian dollar down towards 0.79 against the US dollar (1 USD = 1.26 CAD).
Earlier in January oil prices had jumped to the highest levels since late October above $80 per barrel, leading analysts to predict another rally for the Canadian Dollar.
Given the outperformance of the CAD in 2021, it was no surprise to see some consolidation from late October as investors took profits. However, by the end of the year the gloss was well and truly off the loonie with it falling to a 1-YEAR LOW below 78 cents.
CADUSD has however revived somewhat in the first weeks of 2022 with the level heading back towards 80 cents.
The pound hit a 1-Year LOW in December of 1.32 against the greenback (1 USD = 0.72 GBP) but has recovered into 2022 to above 1.35.
The outlook for the pound is very uncertain due to rising inflation, slowing growth and unemployment, the combination of which could create a nightmare scenario for the Bank of England Monetary Policy Committee.
In the last few weeks, the Mexican peso has been going up and down as a result of 3 factors: mounting U.S. Treasury yields, contagion from the Turkish Lira crisis, and worries about COVID-19 omicron variant coming to light.
When uncertainty increases, traders tend to move quickly out of emerging market FX such as the peso first before looking for safe havens.
That said, the peso has recovered into the new year strengthening from the nearly 22 levels of November back towards a range around 20.5 to the green back.
In 2021, a pipeline of IPOs attracted inflows of portfolio capital which helped buoy the Indian rupee relative to some of its other Asian peers. When most currencies in the region have weakened to some extent versus a stronger dollar.
However, the recent flop of the PayTM IPO and some others suggests that the rupee in 2022 won’t benefit so much from another inflow of funds.
The Japanese yen (JPY) continues to lose ground against the U.S. Dollar (USD). For reference, in early January the Yen was worth over 116 to USD which was a 5-year low.
Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.