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.
Last year, 2020 the year of COVID, US dollar forecasts were almost entirely driven by the effects and response to the Coronavirus pandemic rather than any fundamentals of the US economy.
However as we progress through 2021, the US dollar is being buffeted by predictions of rising interest rates, inflation and the oil price as the world starts the slow path to recovery from the pandemic.
USD in the markets
Last week saw the US Dollar slowly but surely grind its way higher against all its Rivals.
At the close of New York trade on Friday (Saturday morning, Sydney), the Dollar Index (USD/DXY), a favoured gauge of the Greenback’s value against a basket of 6 major currencies settled at 95.70 against last week’s close of 95.10.
The catalyst was a rise in the US June Consumer Price Inflation to 0.9% from a previous 0.6%, beating analyst’s expectations of 0.4%. US Treasury bond yields ended lower. The benchmark US 10-year bond yield closed at 1.29% on Friday, against 1.36% last week.
The bulk of the sell-off in the currencies against the US Dollar is due to the overextended nature of the speculative currency markets… ie, long currencies and short US Dollars.
The US dollar index has had a long stretch of losses, after investors turned optimistic about global growth and pushed the exchange rate lower against a basket of peer currencies.
Deutsche Bank see longer term negative moves for the US Dollar in the second half of 2021. Low US Treasury yields of 1.7% make the dollar less attractive in comparison to other investments.
Risk sentiment has tilted towards higher risk assets and currencies as US data showed strong signs of growth in several key sectors of the economy.
Against this trend Rabobank told Bloomberg News that they see the US Dollar strengthening against many currencies this year as inflation picks up maybe leading to higher interest rates in the US, the so called ‘reflation’ trade.
So far this year however, most banks and forecasters expect the down trend for USD to continue, along with an increase in volatility, with some predictions of a 20 per cent or more fall for the greenback in 2021.
With so many coronavirus associated risks still around, it’s expected the US dollar will have occasional up-ticks as a safe-haven, but the overall trend for 2021 is expected to be down as international economies improve which will weigh on the greenback.
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.
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 U.S. Dollar Index at 92.10 is 0.9% above its 90-day average, range 89.68-92.97.
The following sections show a summary of trends and forecasts for popular US dollar exchange cross rates:
USD to EUR
USD to EUR at 0.8426 has risen 1.1% above its 90-day average, range 0.8163-0.8495.USD/EUR Rates
EUR/USD – Despite some heavy selling pressure, the Euro held a weekly low at 1.1754, settling at 1.1769 at the close on Friday. A week ago, EUR/USD finished at 1.1805. USD-EUR Forecasts
USD to AUD
USD to AUD at 1.3613 has risen 3.5% above its 90-day average, range 1.2738-1.3642.USD/AUD Rates
AUD/USD – another loser against the Greenback was the Australian Dollar. The Aussie hit a November 2020 low on Thursday at 0.7287. The AUD/USD pair settled at 0.7365 on Friday. A week ago, the Aussie Battler was trading at 0.7425. AUD-USD Forecasts
USD to CAD
USD to CAD at 1.2477 has risen 1.5% above its 90-day average, range 1.2037-1.2750.USD/CAD Rates
OFX say that USD/CAD could mostly trade between 1.20 and 1.25 until the Jackson Hole meeting at the end of August. USD-CAD Forecasts
USD to GBP
USD to GBP at 0.7192 is just above its 90-day average, range 0.7038-0.7338.USD/GBP Rates
The British Pound also had a choppy trading week. Sterling finished at 1.3766 on Friday from 1.3765 a week ago. GBP-USD Forecasts
USD to MXN
USD to MXN at 19.88 is 0.6% below its 90-day average, range 19.69-20.67.
After hitting a near 2021 low at 19.7, in June the US Dollar has risen back up the important psychological level of 20 against the Mexican Peso towards the end of July. USD-MXN Forecasts
USD to INR
USD to INR at 74.38 is 0.8% above its 90-day average, range 72.39-75.00.USD/INR Rates
USD/INR – Weekly range has been between 74.5 to 75 with the rupee falling to a 90-DAY LOW vs the greenback of 75 on July 20. USD-INR Forecasts
USD to JPY
USD to JPY at 109.7 is near its 90-day average, range 108.6-111.5.USD/JPY Rates
Against the Japanese Yen, the Dollar finished the week higher mirroring the moves in the benchmark US 10-year yield. USD-JPY Forecasts
USD to SGD
USD to SGD at 1.3543 has risen 1.1% above its 90-day average, range 1.3216-1.3662.USD/SGD Rates
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