The US dollar withstood resilient global growth to maintain its value in 2023 – and the story could be similar in 2024, according to Isabella Rosenberg of Goldman Sachs Research.
This is somewhat unusual. Typically in environments of strong growth, the dollar is expected to underperform the currencies of countries viewed as more risky. But the US economic story in 2023 has been one of outperformance, with the economy on track to grow at a 2.4% pace that well surpasses the 0.4% consensus growth estimates at the start of the year. Given this backdrop and the economic challenges in Europe and China, “it’s no surprise that the majority of cross-border fund flows has been directed into the US,” Rosenberg says.
Looking ahead to 2024, Goldman Sachs Research expects US growth of 2.1%, a forecast that’s double consensus expectations. This environment could foster continued interest in US assets among foreign investors.
“While it might be compelling to forecast dollar depreciation from the top down,” Rosenberg says, “US outperformance in 2024 means that the dollar should remain in high demand.”