Investing.com – The US dollar has been one of the main beneficiaries of this year's events, but BCA sees the greenback peaking in 2025, measured 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 more than 5% higher so far this year, helped by improved US growth as well as the threat of tariffs due to Donald Trump's victory in this year's presidential election.
“However, the US trade-weighted dollar is likely to overshoot and weaken next year,” said analysts at BCA Research, in a note dated December 11. we believe it will be in H1 2025.”
The Trump administration will actively try to weaken the dollar, the investment research company said, because the creation of manufacturing jobs in the US requires either high import tariffs or a large dollar depreciation.
A policy that reduces the greenback is a better choice than a policy that restricts trade. The first would increase the competitiveness of US manufacturing without adversely affecting businesses and investors.
The research house believes that the Trump administration will use the threat of very high prices to force other countries to appreciate their currency.
While 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 in their exchange rates from very low rates to avoid high US import tariffs.
Importantly, they can finally plan currency devaluations after the dust of the US tariff threat settles.
“In short, there could be coordinated policies among major countries to weaken the US dollar, such as the Plaza Accord of 1985. Foreign exchange market interventions rather than higher interest rates outside the SA be used to bring down the green back,” said BCA.
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