Bank of America Expects U.S. Dollar to Strengthen in Second Half 2026, Up 2.5% in First Half

According to Bank of America, released on July 18, the U.S. dollar is forecast to continue strengthening in the second half of 2026 after gaining 2.5% in the first half. The bank attributed the first half appreciation to increased foreign investor exposure to U.S. tech stocks and rising rate expectations.

BofA identified three drivers supporting dollar strength ahead: Middle East tensions raising oil prices (denominated in dollars), persistent AI investment inflows boosting U.S. equities, and expectations of higher interest rates, which increase returns on dollar-denominated assets. FX strategist Alex Cohen noted that rising oil prices and AI-related investment spending maintain inflation pressure, narrowing the Federal Reserve's rate-cut options while simultaneously attracting overseas capital to the U.S.