Economists at Wells Fargo expect a period of elevated volatility but ultimately a stable US dollar through the end of Q1-2022. Over time, as financial markets are priced for too much tightening abroad, the dollar should strengthen. 

US dollar to move sideways in the first quarter of the year

“Through Q1-2022, we believe the US dollar will move sideways, although volatility will remain elevated as headlines surrounding the war in Ukraine evolve.”

“Over the longer-term, we maintain our view for a prolonged period of dollar strength. We believe the Fed will raise interest rates at a faster pace relative to foreign central banks, while financial markets may be priced too aggressively for tightening abroad.”

“As markets adjust to a slower pace of interest rate hikes abroad, the US dollar should strengthen against most G10 and emerging market currencies.”