FXStreet reports that economists at Capital Economics don’t expect the recent weakness in the US dollar to persist.

“We suspect that, rather than risk appetite, relative yields will continue to be the key driver of the US dollar over the next couple of years. We think they will ultimately lead to a stronger dollar.”

“As far as risk appetite is concerned, we don’t think it will wane much more, given the rosy outlook for economic growth. Nonetheless, most measures of global risk premia are now at, or below, pre-pandemic levels, so we don’t think appetite for risk will recover a lot either.”

“In the US, where the vaccine rollout has been particularly rapid, and fiscal support particularly large, we suspect prospects for growth and inflation are among the best in the developed world. This, we suspect, will ultimately result in US yields beginning to rise again. Our expectation is that this will drive the US dollar generally higher.”