Home NewsForex Market News The dollar index hit a new high in nearly 20 years, experts estimate that the probability of falling in the next 6 months is low | Anue Juheng-Forex

The dollar index hit a new high in nearly 20 years, experts estimate that the probability of falling in the next 6 months is low | Anue Juheng-Forex

by WOOWinvest
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The dollar index hit a new high in nearly 20 years, experts estimate that the probability of falling in the next 6 months is low | Anue Juheng-Forex


The U.S. dollar has continued to strengthen this year, with the U.S. dollar index hitting a nearly 20-year high, mainly due to the Federal Reserve’s aggressive interest rate hikes. However, the appreciation of the dollar has also hurt the revenue performance of multinational companies.

Soaring inflation prompted the Fed to start a rate hike cycle. The ICE U.S. dollar index (DXY) rose above 104 at the beginning of this month, hitting a 20-year high.

Fawad Razaqzada, market analyst at Forex.com, said: “The dollar index is expected to be in a strong 100 to 105 range over the next 3 to 6 months, with a low chance of a sharp decline, as other central banks are not like the Fed. Hawks.”

For U.S. companies doing business overseas, a stronger dollar can lead to foreign exchange losses that erode profits and will show up in future earnings data. A whopping 41% of S&P 500 revenue comes from outside the U.S., according to FactSet.

Large companies including Apple (AAPL-US), Meta (FB-US), and Pfizer (PFE-US) have warned in their previously released earnings reports that their performance will be affected by foreign exchange fluctuations.

The U.S. dollar usually strengthens when a recession looms, but Goldman Sachs believes the greenback is now about 18% overvalued, citing historical data that it could be more difficult to predict once the economy does slip into a recession.

U.S. Treasury Secretary Janet Yellen said last week that the dollar’s exchange rate is determined by the market, and it is understandable that the dollar will appreciate as the U.S. raises interest rates. She also warned that the “stagflation” effect caused by the Russian-Ukrainian war and sanctions by various countries has made the global economic outlook challenging and uncertain.

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