Wells Fargo updated its foreign exchange forecast, anticipating a more gradual depreciation of the U.S. dollar over the medium term than previously expected. The bank’s outlook points to a moderate decline in the dollar’s value through much of 2025.
This projection is based on an expected slowdown in US economic growth and a prolonged phase of monetary policy easing by the Federal Reserve.
The report highlighted that certain currencies, including the yen and Australian dollar, may outperform the US dollar in the coming year. Wells Fargo analysts believe these currencies could benefit if global financial conditions remain favorable.
Furthermore, the bank noted that this environment would also be favorable for emerging market currencies, which tend to be more sensitive to risk perceptions.
Wells Fargo’s analysis also pointed to political and policy developments as potential risk factors. The bank cited scenarios that could emerge from the US elections, such as more expansionary fiscal policy and higher rates.
If such events were to occur, they could lead to a scenario in which the U.S. dollar remains stronger for a longer period than currently expected by Wells Fargo analysts.
The bank’s currency forecasts are closely watched by investors and policymakers as they provide insight into how major currencies could perform against the US dollar. The strength or weakness of the dollar has significant implications for international trade, investment flows and the pricing of commodities and other assets.
In conclusion, while Wells Fargo continues to expect the U.S. dollar to depreciate modestly in the coming years, the bank has adjusted its outlook to reflect a slower pace of decline.
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