Dollar Retreat Accelerates as Geopolitics Ease and Policy Distrust Grows
The US dollar has been retreating due to easing geopolitical risks and the return of the 'sell America' trade, which was popular during the trade wars. This trend is expected to continue as distrust of US policy grows following coordinated currency intervention. A report in the Wall Street Journal claims that Donald Trump is in regular contact with Kevin Warsh, which could mean the new Fed chair is a puppet of the White House.
The potential deal between Oman and Iran to reopen the Strait of Hormuz without charging a fee may also contribute to a decline in oil prices. This would lead to diminishing risks of accelerating inflation and a reduced likelihood of the Fed tightening monetary policy, allowing other currencies to strengthen against the US dollar.
However, the yen's gains may be short-lived as some forecasters predict that USDJPY will plummet to 149 by the end of the year. Bank of America believes this will happen if the Bank of Japan accelerates its monetary policy tightening to maintain current levels. By contrast, CBA forecasts a rally in USDJPY to 165 by the second quarter of 2027.