Wells Fargo Sees Dollar Strength Through 2027 Amid Inflation-Driven Rate Hikes

The US dollar is expected to strengthen further through 2027 as inflation-driven rate increases from the Federal Reserve widen interest rate gaps with other developed economies, according to a revised forecast by Wells Fargo Investment Institute.

The firm adjusted its currency forecasts, projecting a target range of $1.10-$1.14 for year-end 2027, down from a previous range of $1.17-$1.21. The yen target moved to ¥160-¥164 from ¥158-¥162, while the euro target increased to 100-104 from 95-99.

The analysts expect the Fed to implement additional rate hikes into 2027, with a full percentage point more in rate increases than previously anticipated. They believe that wider interest rate differences between the US and other developed economies will attract international investors, as the US economy is expected to withstand higher borrowing costs.