The US Dollar Index (DXY) hit a new 20-year high last week. While it has since come off slightly, the index’s year-to-date rally remains over 13%. More near-term USD gains are likely, in the view of economists at UBS.

USD should top out over the next six months

“We think more short-term USD gains are likely and have recently revised our FX forecasts to reflect a stronger greenback in the near-term.”

“By year-end, we expect EUR/USD and GBP/USD to reach 0.96 and 1.12, respectively. We also forecast USD/CNY to hit 7.00 in the months to come.”

“But in the medium-term, we think that a richly-valued USD should top out over the next six months, with markets watching for any turn in the Fed’s hawkish stance, Europe’s energy crisis, and China’s growth woes.”