Source: Wall Street News
Author: Bu Shuqing
Goldman Sachs said that the US dollar is overestimated by about 14-15% on the basis of actual trade weighting, and it is expected that the Fed will cut interest rates five times next year, driving the US dollar index down about 3%.
As expectations of the Fed's interest rate cut continue to heat up, Goldman Sachs's attitude towards the US dollar is becoming more pessimistic, saying that the US dollar is overvalued by about 15%.
Goldman Sachs Kamakshya Trivedi's team of strategists wrote in the latest report that although the US dollar may fall this year, the US dollar “is still overvalued by about 14-15% on the basis of actual trade weighting, which is about 5-6 percentage points lower than the peak of overestimation in the fall of 2022.”
They expect the dollar to depreciate by 2-3% over the next 12 months. As of press release, the US dollar index was reported at 102.32, down nearly 5% from the October high.
Goldman Sachs said:
Entering 2024, the US dollar will remain relatively strong. Given the global macro context from the top down, including significant anti-inflation and strong growth, the Fed's non-recessionary interest rate cuts, and active stock market risk sentiment, we expect the strength of the US dollar to continue to weaken, but still relatively slowly.
Goldman Sachs joined the “bearish dollar” chorus after the Federal Reserve released its strongest signal to cut interest rates so far.
Goldman Sachs analyst Michael Cahill pointed out in a report on Friday that after the Federal Reserve issued a signal that it would quickly implement a “non-recessionary interest rate cut,” Goldman Sachs made a comprehensive adjustment to its exchange rate forecast. It is expected that the Fed will cut interest rates five times next year, driving the US dollar index down about 3%.
Société Générale is even more pessimistic about the US dollar. Kit Juckes, its chief global foreign exchange strategist, predicts that the US dollar index will fall 5% to 97 in 2024.
According to data from the Commodity Futures Trading Commission, before the interest rate meeting last week, hedge funds and other large speculators switched to net short positions on the US dollar for the first time since September.
editor/tolk