‘Perfect storm’ to make dollar biggest loser of 2023; Here’s why

Nigel Green, the CEO and founder of deVere Group, a major financial advisory, asset management, and fintech solutions provider, has warned that the US dollar is likely to be one of the “biggest losers of 2023.”

Notably, the dollar has already declined by 10% from its peak last year and hit its lowest level in a year against the euro just last week. In a statement shared with Finbold, Green said:

“The dollar was on an impressive bull run for around 18 months, the outsized gains hitting a two-decade high against a basket of currencies last September. There will be occasional daily upticks, but the US currency is now on a downward trend that we expect to continue throughout the rest of 2023,”

Further, the CEO of deVere Group underlined that the ongoing correction in the US dollar will primarily be fueled by the aggressive pricing-in of the markets, given that the US Federal Reserve is almost at the peak of its tightening agenda. He added that there is a growing agreement that the Fed will not be able to continue raising rates for much longer. Green said:

“The sustained dollar correction will be largely driven by markets aggressively pricing-in that the US Federal Reserve is pretty much at the peak of its tightening agenda – an agenda that supported the currency throughout 2022. There’s a growing consensus that the Fed cannot, should not, and will not keep on raising rates much longer.”

He also noted that last month’s US banking crisis and improving European growth, a possible potential US recession, and China’s reopening are all putting pressure on the dollar. “It’s a perfect storm that will lead to the dollar being one of the biggest losers of 2023,” he added.

Green says that this shift from a bull to a bear cycle for the dollar will have a profound impact on the global investment environment. He suggests that stock markets outside the US, particularly those in emerging markets, typically perform well when the dollar is weaker. US large caps and multinationals are also likely to do well as much of their profits are generated in countries where the currencies are becoming stronger.

Watch energy and industrial commodities

In addition, Green notes that sectors that can be expected to do well with a weaker greenback include energy and industrial commodities because they are traded in dollars and, therefore, become less expensive for non-US-based buyers as the dollar declines. Tech should also do relatively well, as much of the revenue comes from outside the United States.

With the dollar’s rally coming to an end, Green suggests that global investors should be re-evaluating their portfolios to seize opportunities in a new cycle. He warns that the dollar being in retreat can jolt portfolios, especially if they aren’t properly diversified.

Green previously warned that the US dollar’s dominance is in decline as Russia and Saudi Arabia eye the Chinese yuan for oil trades, which could dramatically reduce the demand for US dollars and decrease the value of the US currency. This could have a number of ripple effects throughout the global economy, including hugely increased inflation in the United States and potentially destabilizing effects on financial markets.