The US dollar (DX-Y.NYB) has had a strong start to the year. Driven by booming foreign demand for US tech exposure and expectations of higher-for-longer interest rates, the greenback has appreciated roughly 2.5% against a basket of other major currencies.
Bank of America believes the US currency has more room to run in the second half of 2026.
The bank's foreign exchange desk sees three primary drivers for dollar outperformance: conflict in the Middle East, the AI boom, and a higher-for-longer interest rate outlook.
First, the war in Iran and the closure of the Strait of Hormuz are set to keep geopolitical tensions high and oil prices higher. Even after a sharp decline in June, futures on Brent crude (BZ=F) and US WTI crude (CL=F) are still up roughly 40% on the year — and a new wave of conflict is driving them higher still.
Given that oil is priced in dollars, bids for the product are expected to support the greenback through foreign-exchange demand. The dollar is also well-positioned for traditional risk-off safe-haven purchases, FX strategist Alex Cohen said in a recent client note.
Bank of America believes the US currency has more room to run in the second half of 2026.
The bank's foreign exchange desk sees three primary drivers for dollar outperformance: conflict in the Middle East, the AI boom, and a higher-for-longer interest rate outlook.
First, the war in Iran and the closure of the Strait of Hormuz are set to keep geopolitical tensions high and oil prices higher. Even after a sharp decline in June, futures on Brent crude (BZ=F) and US WTI crude (CL=F) are still up roughly 40% on the year — and a new wave of conflict is driving them higher still.
Given that oil is priced in dollars, bids for the product are expected to support the greenback through foreign-exchange demand. The dollar is also well-positioned for traditional risk-off safe-haven purchases, FX strategist Alex Cohen said in a recent client note.
24 days ago
