US Dollar Index to fall around 2.5% to 107.30 by end-2022 – Westpac

Economists at Westpac have flattened out their profile for the US dollar into year-end. The US Dollar Index is forecast at 107.30 by end-2022.

DXY to fall 10% cumulative to December 2023 and a further 2% in the first half of 2024

“DXY is now only expected to fall around 2.5% to 107.3 by end-2022. Admittedly though, this revised forecast is 4% lower than the most recent peak for DXY of 110.8 seen a week ago.” 

“US economic weakness on an absolute and relative basis is expected to weigh heavily on the US dollar through 2023 and to mid-2024, DXY falling 10% cumulative to December 2023 and a further 2% in the first half of 2024. A period of stability is seen thereafter with the US likely to be running a consistently large negative output gap in the order of 3-3.5ppts from end-2024, with growth near trend, and the fed funds rate back towards a neutral level. Note, 95 is not an outright weak level for the US dollar, being in line with the average of the past 5 years.”