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Goldman Sachs expects the U.S. Dollar to remain strong as diverging global macroeconomic trends continue to favor the American economy over other major regions. In its latest global research report released Friday, the investment bank said shifting terms of trade and prolonged energy disruptions are reshaping foreign exchange markets and increasing demand for the greenback.
According to Goldman Sachs analysts, recent economic data from China and Europe point to slowing growth momentum outside the United States. China’s April activity figures delivered a significant downside surprise, while Europe’s May flash PMI data showed further economic deceleration. These developments have reinforced the Dollar’s position as a global safe-haven currency.
The report noted that Goldman Sachs had previously expected the Dollar to weaken as U.S. economic growth normalized. However, the ongoing artificial intelligence investment boom in the United States, combined with elevated global energy prices, has strengthened America’s relative economic outlook and boosted confidence in the Dollar Index (DXY).
Analysts added that restrictions in global commodity flows, especially around the Strait of Hormuz, are intensifying pressure on international currencies. European currencies have underperformed recently as markets increasingly worry that higher energy costs could weigh heavily on regional economic activity.
Across Asia, central banks are responding aggressively to currency weakness and capital outflows caused by higher U.S. interest rates. Bank Indonesia unexpectedly raised interest rates by 50 basis points to 5.25% this week in an effort to stabilize the Indonesian Rupiah.
Meanwhile, the South Korean Won continues to weaken despite strong technology export performance, largely due to persistent foreign equity outflows. Goldman Sachs expects additional monetary tightening later this year from the Bank of Korea, the Reserve Bank of India, and Taiwan’s central bank as policymakers attempt to control inflation and support local currencies.
The bank also projects that Malaysia and Thailand will likely maintain current policy rates amid ongoing global market uncertainty.
