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Analysts at Wells Fargo revised their outlook for the US dollar modestly higher, on the back of an improvement in the US growth outlook and higher yields. Over the long term, they see moderate weakness for the greenback.  

Key Quotes:  

“The U.S. dollar has gained over the past month and our outlook is for some further U.S. dollar strength for the time being. Further fiscal support in the United States, elevated U.S. yields and a stronger U.S. economic outlook are all supportive trends for the greenback, which should see the trend of U.S. dollar strength persist in the coming months.”

“As long as the global economic and market environment remains favorable overall, commodity-sensitive and emerging currencies should do well over time, and our outlook remains for eventual and moderate U.S. dollar weakness over the longer term.”

“We expect the Federal Reserve to remain accommodative even as inflation begins to rise. A key risk is that almost every country in the global economy will be experiencing a rebound this year to varying degrees. While it is not our baseline forecast, there is scope for an inflation shock amid this globally synchronized rebound.”