USD likely to strengthen against most G10 and emerging market currencies in the foreseeable future – Wells Fargo

Analysts at Wells Fargo maintain their view for a broadly stronger US dollar over the course of 2022 and into 2023. They consider a more hawkish Federal Reserve should result in capital flows toward the greenback, pushing it to the upside against most G10 and emerging market currencies.

Key Quotes: 

“We expect the greenback to strengthen against most G10 and emerging market currencies in the foreseeable future. The Fed has already sped up the tapering of its bond purchases, and with interest rate hikes now seemingly imminent, the Fed has shifted to a more hawkish stance on monetary policy. As the Fed continues to tighten monetary policy at a quicker pace than markets previously expected, we expect capital flows toward the U.S. dollar to materialize over the course of this year.”

“Over the first few weeks of 2022, foreign currencies have outperformed; however, as U.S. Treasury yields rise and the Fed maintains its hawkish approach, we expect the current weaker U.S. dollar trend to reverse course.”