The US dollar has resumed its surge, with the DXY Index hitting its highest level since 2002. However, the US dollar’s surge looks unlikely to endure, in the view of economists at UBS.

Commodity currencies to benefit as commodity prices rebound from the recent dip

“In the current atmosphere of risk aversion in markets, the US dollar rally is likely to continue in the near term. But in our view, this strength is unlikely to persist over the longer term.”

“Further US dollar upside is likely to be capped by slowing US economic growth and market perceptions that the Federal Reserve will start to cut rates again in 2023.”

“The Swiss franc now looks more attractive than the US dollar as a safe haven, especially given the willingness of the central bank to allow currency appreciation to curb inflation.”

“Commodity-linked currencies also look set to appreciate, notably the Canadian and Australian dollars, as the recent bout of commodity weakness reverses.”