Dollar’s depreciation is likely to be temporary and small – Natixis

The USD has been declining against all currencies since October 2022. Will the Dollar’s decline continue? Economists at Natixis analyze Greenback’s outlook.

No decline in the weight of the Dollar in foreign exchange reserves

The Dollar has depreciated against all currencies since October 2022. This depreciation is probably due to the outlook for monetary policy: the US is expected to cut rates before other OECD countries.

But we do not believe that we should anticipate a sharp and lasting depreciation of the USD. Indeed, the only component of Dollar demand that remains stable, but is not declining, is demand for Dollars from central banks. The weight of the Dollar in financial transactions has been increasing since 2010, and in trade transactions since 2021.

Moreover, the outlook for the US economy is more positive than for the Eurozone or Chinese economy, due to demographic trends, productivity and R&D spending.