Reply To: Forex Weekly Outlook – Japanese Yen Weakest Major Currency Against US Dollar in 2022

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Goldman sachs says a recession would cast doubt on a strong US dollar Via Bloomberg

Note from Goldman Sachs strategists including Zach Pandl, co-head of global FX and EM strategy

cites historical data showing a more mixed performance for the greenback during an economic contraction

While the US dollar typically strengthens when a recession is looming, all bets are off once it hits

Right now, the US dollar is currently “highly overvalued” by around 18%
Goldman sees two possible outcomes for the currency in coming weeks:

if the global growth outlook improves, it will weaken as investors veer to riskier assets;
if the world economy does enter a recession, the dollar’s path is murky.

In the former case, the dollar should be shorted against most currencies, with the bank particularly favoring commodity exporters like the Canadian dollar.

In the latter, the Japanese yen will likely outperform the dollar as it usually does well during recessions.