Home Forex Four Reasons Why the USD’s Current Advantage Is Turning into a Headwind – BofA

Four Reasons Why the USD’s Current Advantage Is Turning into a Headwind – BofA

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Economists at Bank of America analyze a potential shift from the U.S. dollar’s (USD) carrying advantage to a significant headwind.

We are facing a challenging period for the USD

The Fed is expected to be one of the first G10 central banks to cut rates, challenging the USD conversion advantage.

Given the higher starting point of US rates, their possible reduction could significantly narrow interest differentials against other currencies and reduce the attractiveness of the USD.

The USD is one of the most overvalued currencies in the G10, a factor that could exacerbate its vulnerability in a rate-cutting environment.

Lower US interest rates typically increase global risk appetite, a dynamic that historically benefits non-USD currencies.

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