Could the Dollar Drop in ’22?

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US Dollar Prospects Dull in 2022

 

Is it time to bet against the crowd? Fuelled by increasingly uncertain market prospects, there is a tight consensus that the US dollar will be strong by default in 2022. But a year ago an equally robust consensus predicted a weak US dollar in 2021 and has since been proved wrong. Currencies are dominated by capital flows: capital flows are liquidity phenomena that largely rest on US Fed policy; on the strength of the World economy and on the underlying demand for 'safe assets'. Here we are concerned by two factors that may undermine the US unit in 2022: First, the Fed is already playing 'catch-up' with other policy-makers and, despite a more aggressive taper, it may fall 'behind the curve'. Second, the past decade has already seen huge inflows into US 'safe assets'. This perfect storm into the US dollar may be abating?

 

 

See our latest published research, Global View - US Dollar Prospects Dull in 2022 - December 2021

 

 

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