Wells Fargo has updated its currency market forecast to predict a more gradual depreciation of the U.S. dollar over the medium term than previously expected. The bank’s outlook suggests a moderate decline in the dollar for most of 2025.

This forecast is based on an expected slowdown in U.S. economic growth and an extended period of monetary easing by the Federal Reserve.

The report highlighted that some currencies, including the yen and the Australian dollar, could outperform the U.S. dollar next year. Wells Fargo analysts believe these currencies could benefit if global financial conditions remain favorable.

The bank further noted that such an environment would favour emerging market currencies, which are generally more sensitive to risk perception.

Wells Fargo’s analysis also pointed to political and policy developments as potential risk factors. The bank pointed to scenarios that could emerge from the U.S. election, such as more expansionary fiscal policy and increased tariffs.

If such events were to occur, it could lead to a scenario in which the US dollar would remain higher for a longer period than Wells Fargo analysts currently predict.

The bank’s currency forecast is closely watched by investors and policymakers because it provides information on how major currencies may behave against the U.S. dollar. The strength or weakness of the dollar has essential implications for international trade, investment flows, and the prices of goods and other assets.

Overall, Wells Fargo still expects the U.S. dollar to weaken moderately over the next few years, but the bank has revised its forecasts to reflect a slower pace of decline.

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