Summary
The dollar has strengthened into 2025, as the U.S. economy has grown at a somewhat surprisingly solid pace and the high level of interest rates has attracted global investors into dollar-denominated securities. The greenback has climbed more than 2.0% on a trade-weighted basis since the November election and is 22% above its average value since 2000. Looking ahead, we anticipate a relatively stable trading range for the dollar for the balance of the year, for several reasons. For one, the dollar typically tracks GDP growth trends, and we think the U.S. economic expansion is poised to ease in coming quarters as jobs growth slows. In addition, we expect the higher level of bond rates to increase the government's interest payments as a percentage of GDP from recent lows of 1.2%, putting a modest strain on the U.S. balance sheet. The current rate is 3.0%. Finally, the still-elevated valuation of the greenback implies that other currencies -- and even gold or other commodities -- are possibly undervalued, and we would expect investors such as the petrodollar-fueled sovereign wealth funds to bid up those values at a me
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