US dollar likely to stay strong in 2023-24, say analysts

The US dollar will stay strong this year and the next on the back of a high-interest rate regime by the Federal Reserve, say market analysts. They believe that bonds are the best bets for investors due to stable and steady returns amidst high interest rates.

Hani Abuagla, senior market analyst at DIFC-based XTB, said the US dollar index has moved from 100 to 105 in the past six months. "In the coming days and months, the dollar will get stronger because of last Fed comments that it will keep interest rates up high for a long till 2024-25. It might start cutting interest rates only at the beginning of 2025 and 2026. So we are going to have a long journey of high-interest rates that puts the dollar in a strong position," Abuagla said on the sidelines of the two-day Forex Expo Dubai 2023 exhibition at Dubai World Trade Centre.

He pointed out that a strong US economy also contributes to a stronger greenback.

"There is a little bit of fear in the market that there is no appetite for the risk. Hence, the 10-year dollar bond is skyrocketing at 4.7 and might reach 5 per cent. This is because people are moving out of risk assets and going to safe havens, and the dollar is a safe haven among all currencies. That's why there is so much demand for the dollar," he added.

Damian Bunce, chief customer officer at Exness, said in the last three months, the US dollar has strengthened while the yen, euro and pound have weakened.

Exness, which has more than 600,000 active trading clients, recorded forex trading of around $4.5 trillion in August. The UAE still accounts for a smaller proportion of the company's trading volume as it is still building infrastructure here.

Going forward, he said crises such as Ukraine-Russia and the threat of de-dollarisation could potentially influence the US dollar.

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