The greenback has already embarked on a prolonged period of depreciation that could last into 2024, warn analysts at Wells Fargo. They point out that the relative economic growth performance, and monetary policy outlook have turned less supportive of the US dollar.

No longer forecasting USD strength early this year

“The U.S. dollar has embarked upon a prolonged period of depreciation. Relative growth and monetary policy fundamentals have become less supportive of the greenback. We expect U.S. dollar depreciation to be gradual in early 2023 as the U.S. falls into recession during the second half of this year, but the Federal Reserve hesitates from lowering interest rates prematurely.”

“We expect the U.S. dollar's depreciation to gather pace in 2024 since, even as the U.S. economy begins stabilizing, we believe the Fed will start cutting interest rates quite aggressively starting early next year. From current levels, we forecast the Fed's trade-weighted dollar index versus advanced foreign economies to soften 3% by the end of 2023, and by a cumulative 8.5% by the end of 2024.”