The strength of the US dollar has seen most other G10 currencies reach historic lows in recent months. In the view of economists at ANZ Bank, the pace and speed of tightening monetary policy among major central banks are biased towards US dollar dominance in 2022 and the first half 2023.

DXY will likely peak at 115 in the first half of 2023

“In the near-term, with real yields deeply negative, we see little prospect for any immediate relief from USD strength. On this basis, we expect to see the USD overshoot from fair value in response to monetary policy tightening.”

“The US dollar will continue to attract safe haven bids as we expect global recessionary fears to deepen in the coming months. In line with our stronger US dollar view, the US Dollar Index (DXY) will likely peak at 115 in the first half of 2023.”

“We have revised our forecasts for major currencies to bottom out vs the US Dollar in the first half of 2023, as follows: AUD (0.64), NZD (0.57), EUR (0.95), GBP (1.10) and JPY (150).”