Dollar strength could continue into the early part of 2023 – Wells Fargo

According to analysts at Wells Fargo, the strength of the US dollar could persist more than previously estimated after the events of this week that includes rate hikes from many central banks and the decline in stock markets. 

Key Quotes: 

“The takeaways from this week's central bank bonanza are clear to us. With the FOMC turning even more hawkish, combined with foreign central banks likely not able to keep pace with the Fed, the U.S. dollar should continue to strengthen. Right now, we forecast broad dollar strength against most G10 and emerging market currencies through the end of this year.”

“We now believe risks to our dollar view are tilted towards further upside. Given the hawkish Fed outlook on interest rates, dollar strength could persist into early 2023. The dollar's relentless rise should be most robust against the emerging market currencies, but risk sensitive currencies like the Australian and New Zealand dollar could also experience renewed downside.”

“Heading into this week, we believed the U.S. dollar would continue to strengthen through the end of this year. After the events of this week, we have increased conviction in that view, and now believe dollar strength could continue into the early part of 2023.”