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.
Most banks and forecasters expect the down trend for USD to continue, with some predictions of a 20 per cent or more fall for the greenback in 2021.
The US dollar has dropped steadily in the last quarter against nearly all major currencies. In mid December the US Dollar fell to a nearly three year low with the US Dollar Index hitting its lowest value and falling below 90 for the first time since January 2018.
In the long term, economic fundamentals suggest weakness for the USD. The Federal Reserve promised to keep interest rates low until signs of inflation. In December we expect the USD to experience some volatility but should at least remain range-bound against euro, AUD, NZD, CAD and GBP. December Currency Update
Optimism around a $908 billion stimulus package and positive vaccine headlines are boosting risk sentiment, prompting investment in equities and taking money away from the USD. The ongoing COVID-19 surge is also weakening consumer demand.
Negotiations continue for a fiscal stimulus deal to support the US economy, but if negotiations fail before Biden’s inauguration, there could be a bounce. Likewise, should the incoming Biden administration make any announcements around corporate regulation, this could trigger a move away from equities and cause some appreciation of the USD in the short term.
The US dollar held its value in 2019 despite the US-China trade tensions, mainly because the greenback is still considered a safer currency to own than most others.
This is a difficult question and the answer really depends on many factors. The best way to consider an exchange rate’s current relative value is to look at the US dollar’s history against a range of currencies and in particular against the currency you are interested in exchanging it with.
The following sections show a summary of trends and forecasts for popular US dollar exchange rates.
USD to AUD
National Australia Bank have revised upwards their Aussie dollar forecasts now expecting the AUD/USD rate at US80c by June 2022 ( USD/AUD = $1.25 ), up from their previous forecast of US75c.
If risk sentiment continues to improve, the CAD is well placed to extend gains. In the longer term, there is a perception Canada will enjoy a renewed close trade relationship with the US, with Biden as US President.
The pound has hit its highest level vs the US dollar since April 2018 against the US dollar on the final day of 2020 and continued higher, as markets remain optimistic after the UK parliament’s approval of Britain’s post-Brexit trade deal.
Since the end of June, the Mexican peso has gained almost 10% against the dollar, the best performance among about 140 currencies tracked by Bloomberg. The peso has also delivered the No.1 carry trade — the gains made by borrowing dollars and buying short-term peso-denominated securities — a reward for investors with the stomach to go in after a precipitous 18% selloff in the first half of 2020.
Since INR’s high against the US dollar in October of below 73 Indian rupee has dropped back to between 74 and 75.
At the time of writing USDINR at 74.14 is a little above its 90-DAY average, range 72.96-75.
This was after being up around 3% against the US dollar (in August) since its low of 77 versus the greenback in April and is gaining favour from bank commentators such as HSBC due to the attraction of the carry trade – the ability to earn higher interest when holding INR versus other major currencies.
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates
and should not be taken as a reference to buy or sell any financial product.
