Dollar gain might hinder other central banks' inflation fights by making their currencies cheaper. Sticky inflation has also prompted the European Central Bank to reject rate cuts at its Thursday meeting. Signs that euro zone officials may delay easing might strengthen the euro and hurt the dollar.
Though the dollar's surge is straining strategists, they remain negative. For the rest of the year, currency analysts expect the dollar to drop, but 80% believe it might exceed their target, a February Reuters survey showed.
Brandywine Global head of macro strategy Paul Mielczarski calls the dollar's return a "tactical rally as opposed to a change in the underlying trend overall."
Mielczarski is encouraged by promising growth outside the U.S., notably the global semiconductor cycle, which supports currencies like the Korean won. Some predict more reasons for dollar strength, especially if former U.S.
Donald Trump emerges victorious in a presidential reelection campaign that lasted for several months.
As a result of Trump's tariff increases, experts at Capital Economics believe that the Federal Reserve may tighten its monetary policy and begin a trade war, both of which will increase demand for the United States dollar as a safe haven.
The value of the dollar increased after Trump was elected president in 2016, but it fell by 10.5% while he was in office.
According to Wizman of Macquarie, investors will most likely be unwilling to continue placing bearish wagers on the greenback, despite the fact that this outcome is still quite a ways off. "I think it's a'show me' story," agreed upon. "The amount of skepticism on the part of traders is high."
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