The US dollar has been transitioning from a weaker to stronger state this year. In the view of economists at HSBC, the USD will likely remain resilient, amid slowing global growth and the Fed’s forward guidance on rate hikes.

The USD’s modest strength looks set to persist in 2022

“Yet, there is clearly some concern about the poor mix of slowing global growth with stickier inflation.”

“In our view, ‘stagflation lite’ – a lighter version of the 1970s stagflation – is occurring. We believe that this still plays to the advantage of the USD – one of the ‘hardest’ currencies.”

“A more serious form of stagflation is not our base case; however, if the markets increasingly fear this scenario, the USD should also be primed to benefit.”