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2022/12/20 / Erste Group Research

Slightly weaker dollar expected

The dollar has weakened significantly since November. The reason for this was signs of a foreseeable end to US interest rate hikes. The market thus ran out of imagination for the previously very high valuation of the dollar. The movement took place quickly and should not continue at this pace.

After the Bank of Japan surprisingly widened its tolerated fluctuation band for yields on long-dated government bonds from +/- 25 bp to +/- 50 bp, the yen strengthened strongly against the euro in the short term. Since the currency markets first have to adjust to this new situation, we expect increased volatility in the yen exchange rate in the short term.

The SNB tightened monetary policy further in December, raising the key SNB interest rate by 50 basis points to 1.0%. By reducing the pace of the hike the SNB took account of the slight easing of inflationary pressure. Despite the easing inflationary pressure, the environment of high inflation rates at the global level and high geopolitical risks continues to favour the franc as a safe haven currency in the short term.

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General information

AuthorErste Group Research
Product nameForex News
Topic in focusFX, Macro/ Fixed income
Economy in focusJapan, Switzerland, United States
Currency in focusSwiss Franc, US Dollar
Sector in focus-


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