The US dollar outlook and investing implications report, prepared by Multiply Group’s Research & Insights team, is a crucial piece of information in making cross-border investing decisions. The US dollar, and with it the UAE dirham, appreciated significantly last year as interest rates rose in the US and investors sought the safety of the greenback amid the prevailing uncertainty. Understanding the direction of the USD in 2023 is important to internalize it in investment decisions and risk analysis.
In 2022, the US dollar gained strength against the currencies of other major economies, appreciating 12% and reaching its highest level in 20 years. This strengthening reflects the market's views on the global economy and policies. It is likely the dollar has peaked and moderating expectations for US interest rates is expected to lead to a continued yet restrained softening of the dollar as the Fed approaches its terminal rate. As other global economies begin to provide more competitive policies and post stronger economic data, we could see a continued shift of capital to other markets.
Emerging economies are expected to be more stable and witness higher growth, and accordingly, the risk-adjusted returns will be higher. The key is to build a robust currency risk screening mechanism and hedging tools when investing in emerging economies. These include economies that have a large current account deficit, declining foreign reserves, rising inflation, and an openness to creating artificial exchange rates and capital controls.DOWNLOAD