The US dollar should find support as the Fed remains on a tightening path.


  • The labor market report for November came in stronger than expected in terms of new employment wage increases.
  • While recent data pointed to a weakening economy and an easing of inflation, Jerome Powell noted that wage growth remains “well above the levels that would be consistent with 2% inflation over time.” He also noted the risk of this spilling over into core services inflation, making it harder to bring down.
  • Our view is that the Fed should hike rates by 50bps in December and another 50bps in 1Q23.

But the greenback's record run may struggle later in 2023.


  • The dollar has already appreciated materially over the past year and its valuation is high.
  • We expect it to peak once the Fed has hit its target rate and once investors start to anticipate a trough in global economic activity. We think these conditions should be met in 1H23.

We continue to favor the Swiss franc.


  • The rate hike cycle in Switzerland is still in its early stages after the Swiss National Bank in September took its policy rate above zero for the first time since 2011.
  • We believe the SNB will remain hawkish and we see more upside for the CHF as it also benefits from its safe-haven status.

Did you know?


  • While the European Central Bank and the Bank of England are more likely to surprise on the hawkish side in its upcoming meetings in December, we think this risk bias is likely to be already priced in currency markets.
  • The USD tends to benefit from both its safe-haven quality and yield amid global economic growth concerns. With near-term recession risks looming large, particularly for Europe, we see scope for the USD to strengthen in the near term again.
  • Exposure to the Swiss franc is one way for investors to improve the resilience of their portfolios against the current macroeconomic backdrop.
  • Watch our Deep Dive video on sheltering in safe havens.

Investment view


We think the US dollar is likely to be supported in the near term, at least while the Fed is still hiking interest rates and global economic growth expectations are being revised lower. We continue to favor the USD and the CHF.


Main contributors - Daisy Tseng, Teck Leng Tan


Content is a product of the Chief Investment Office (CIO).


Original report - Has the US dollar peaked, 5 December 2022.