Dollar Set to Hold Firm, But Long-Term Outlook Bleak

A Reuters poll of FX strategists suggests that the U.S. dollar will hold firm over the coming months but trade weaker in a year.

The greenback has recovered from its August sell-off following renewed military conflict between the United States and Iran, and interest rate futures are now betting on two Fed hikes this year to tame inflation.

However, currency strategists' forecasts for dollar weakness have barely budged since the August poll, with medians showing the euro holding at $1.16 in three months, $1.17 in six months, and $1.18 in a year.

Dan Tobon, head of G10 FX at Citi, believes that the repricing of the Fed's interest rate hike expectations will be crucial for the dollar's performance.