Great times are ahead for the US dollar, according to analysts at BCA Research. The outlook seems promising, especially since the greenback has been one of the biggest beneficiaries of 2024. However, BCA sees the currency reaching its peak next year, weighed down by "coordinated policies among major countries to devalue the US dollar."
The current rally in the dollar is supported by strong US economic performance and the potential for tariff hikes following Donald Trump's victory in the presidential election. At the same time, there is a growing likelihood that the dollar will decline next year. Nevertheless, BCA Research remains optimistic about the near-term outlook for the US currency, although they caution that "the precise timing of a top in the greenback is uncertain, we believe it will be in H1 2025."
According to BCA Research, Trump’s administration will likely attempt to devalue the greenback, as creating jobs in the US requires either high import tariffs or significant dollar depreciation.
Experts believe that a strategy aimed at weakening the US national currency is a better option than imposing trade barriers. This would enhance US manufacturing competitiveness without negatively impacting businesses and investors, BCA Research noted.
Analysts predict that the White House administration will use the threat of high tariffs to push other countries to strengthen their currencies. European nations, as well as Japan and China, may agree to adjust their exchange rates upward to avoid hefty import tariffs from the US.
Eventually, these countries could initiate currency depreciation after "the dust of the US tariff threat settles," BCA Research concluded.
