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.
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 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.
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.
Whether the US dollar will rise or drop in the future 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.
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