Nomura: Dollar rally may end

According to Nomura strategists, the dollar rally may be over as the slowdown in US inflation and China’s economic measures support riskier assets. Institutions such as Nomura and Morgan Stanley expect the dollar to make its next significant move downward. “Given the slowdown in core inflation in the US and the reopening of the Chinese economy, a more ‘sustainable turn’ in the dollar appears imminent. The effects will also be broader,” Nomura strategists led by Craig Chan in Singapore wrote in a note. The Bloomberg Dollar Index has fallen nearly 6% since its record high in September as lower-than-expected US inflation led to expectations that the Fed will slow the pace of interest rate hikes. The dollar rose again this week after Fed Governor Christoph Waller said interest rates would continue to rise for a while. However, this rise was limited as China announced new measures targeting the real estate sector. Morgan Stanley analysts also shared their prediction that the dollar would fall in 2023 as inflation eased, emphasizing that this scenario would support emerging market assets. Bank of New Zealand Senior Market Strategist Jason Wong made the assessment that "There may be consolidation in the dollar in the short term, but there is downside potential in the long term."