Dollar Expected to Rise 5% This Year, Approaching Previous Highs

Given the strong performance of the U.S. economy, market expectations for interest rate cuts by the Federal Reserve have diminished, coupled with the prospect of Trump potentially increasing tariffs further, Wall Street analysts widely anticipate that the dollar will continue to strengthen. Forex strategists from institutions such as Goldman Sachs, TD Securities, and Deutsche Bank expect the dollar to have room for further appreciation this year. The Bloomberg dollar spot index achieved its fifth consecutive day of gains on Monday, just 2.8% away from the highs of 2022. Currently, the cost of hedging against a dollar increase over the next year has risen to its highest level in nearly two years.

Helen Given, a forex trader at Monex, expressed confidence that the dollar will maintain its strong position, noting that if the Bloomberg dollar index is to break through the levels of November 2022, this could happen shortly before or after Trump's inauguration.

Kamakshya Trivedi, a strategist at Goldman Sachs, has raised the expectation for dollar appreciation for the second time in two months, now forecasting that the dollar will increase by 5% this year. George Saravelos, a strategist at Deutsche Bank, expects the euro to fall below parity due to the widening interest rate differential between the U.S. and Europe, predicting an exchange rate between $1 to €0.95 and $1.05.