Investing.com – The US dollar has been one of the main beneficiaries of this year’s events, but BCA expects the dollar to peak in 2025, driven by coordinated policies to limit its strength.
At 06:05 ET (11:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 106.280.
However, the index is up more than 5% so far this year, helped by the outperformance of US growth and the threat of tariffs in the wake of Donald Trump’s victory in that year’s presidential election.
“However, there is an increasing likelihood that the trade-weighted U.S. dollar will roll over and depreciate next year,” analysts at BCA Research said in a Dec. 11 note. “While the precise timing of a dollar top is uncertain, we believe it will occur in the first half of 2025.”
The Trump administration will actively try to devalue the dollar, the investment research firm said, because creating manufacturing jobs in the US requires high tariffs or a substantial depreciation of the dollar.
A policy that devalues the dollar is a better option than a policy that imposes trade barriers. The former would increase the competitiveness of U.S. industry without negatively impacting businesses and investors.
The research firm believes that the Trump administration will use the threat of very high tariffs to force other countries to appreciate their currencies.
Although it is against their economic interests to appreciate their own currencies when domestic growth is very weak, Europe, Japan and China will agree to upward adjustments of their exchange rates from very low levels to avoid high US import tariffs.
Importantly, they can ultimately bring about the depreciation of the currency after the dust of the US tariff threat settles.
“In short, there could be a coordinated policy among the major countries to devalue the US dollar, such as the Plaza Accord of 1985. Currency market interventions rather than higher interest rates outside the US could be used to drive the dollar down. bring,” says BCA. .
