Introduction

Global currencies from the British Pound and the Japanese Yen to the Chinese Yuan are plunging. At the same time, the US dollar is surging to new highs. So what's behind the volatility in the currency markets and how much higher can the dollar go? Under our central scenario, we think even from current strong levels, the dollar can appreciate further. We have another couple of percent dollar appreciation baked into our forecasts for the next few months. In a more hawkish scenario where US inflation is more entrenched, the Fed needs to move further and keep rates higher for longer than envisaged. I think you could see another 5 to 7 percent appreciation on the broad dollar in that sort of hawkish scenario