Approaching the end of USD dominance – ANZ

The velocity of the USD’s rise has been driven by the pace and size of interest rate increases. In the view of economists at ANZ Bank, we are approaching the end of US Dollar dominance.

Scope for USD consolidation in the short term

“We expect currency volatility to continue into 2023, as the synchronised global tightening cycles and recession risks continue to drive returns.”

“We think the USD’s peak was set when the DXY touched 114 in September after rising over 20% since January. The USD’s exceptionalism premium has diminished on rising fears of a US recession. The energy and political risk premiums in Europe and the UK have also waned.”

“In the short term, there is scope for USD consolidation. We expect it to receive safe haven attention due to the rising fear of recessions , and there is also room forhawkish surprises from the Fed that are not currently reflected in the price.”