The US dollar remains close to an all-time high in real effective terms, according to the Economist Intelligence Unit (EIU).
It noted that the remarkable resilience of the greenback is a reflection on the strength of the US economy, which has defied high interest rates and market predictions (a record-long period of yield curve inversion indicates so far unmet expectations of a major slowdown).
“High US policy rates and, more recently, investor repositioning in anticipation of a later start to US monetary easing have provided a large degree of support for the currency. However, the dollar has rarely been so strong relative to interest-rate differentials, suggesting that other factors are playing a significant role, not least elevated global political risk”, it revealed in an article “A stronger for longer US dollar: Predicting the effects on emerging markets”.
EIU, however, expects the dollar to weaken gradually from late 2024, but risks are tilted firmly towards
its strength persisting, adding, any US efforts to weaken its currency are likely to be in vain.
