Forex Flash: USD relatively weak for next 2 years - HSBC

“Over the next two years we see the dollar remaining relatively weak, as the US continues to struggle with its fiscal deficit,” the HSBC Global Currency Strategy Research Team says, adding: “We see the euro remaining relatively strong, as the sovereign debt problems are gradually addressed. Upward pressures on many EM currencies may intensify, but official resistance to appreciation will be strong.”

“Once US economic recovery is better established,” they add, “we would expect the dollar to move back towards long term fair values. We expect JPY to remain relatively strong longer term for structural reasons, but expect CHF to unwind some of its extreme overvaluation,” the Team concludes.