Dollar Dominance in 2024: A Year of Unexpected Strength for Global Investors

The year 2024 brought with it a series of unexpected developments for global investors.

One of these surprises was the strength of the dollar. Investors who entered the year predicting that the dollar would fall are having to reconsider their positions due to the overheated US economy and sticky inflation that requires the Fed to postpone lowering interest rates.

While the International Monetary Fund (IMF) expects US growth to be twice as fast as other G-7 countries, the discourse that “the USA is an exception” supports stocks and bond returns, increasing the appeal of the dollar. Geopolitical tensions are also a factor that supports the dollar as a safe haven.

These developments caused Vanguard Group, the world’s second largest fund management company, to predict a long-term rise in the dollar, while UBS Asset Management predicts that the dollar will probably rise further, although it is 20% more expensive than its normal value. Wells Fargo Investment Institute also thinks that the dollar’s rise will extend until 2025.

Vanguard’s Ales Koutny said, “If other countries cannot keep up with the US’s growth and inflation rates, there will be no choice but to buy the dollar. Buying dollars, which was previously a very tactical trade for us, has become a much more long-term strategy.”

Source: Bloomberght / Prepared by Irem Yildiz

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