Where Next for the US Dollar?

The greenback was golden for much of 2022, with the US dollar riding its strongest wave higher in two decades on the back of rising interest rates.

But as the year draws to a close the tide seems to be turning against the dollar, and as investors look ahead to 2023, a weakening dollar could complicate the already uncertain outlook for inflation.

“We have to watch the dollar carefully,” says Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. “The dollar is in the process of peaking. If the dollar rolls over and rolls over hard, that is a problem for the Fed.”

For much of 2022, it was a one-way ticket higher for the US dollar against other major currencies.

From its low in mid-January through its peak in September, the US Dollar Currency Index was up nearly 22% compared with double-digit declines in stocks and bonds.

Turning Point?

In the past few months, however, the…

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