Goldman Sachs reports that on March 25, FX strategists said that if the focus in currency and interest rate markets shifts from the fallout of inflation to growth concerns, the dollar’s rally since the Iran war outbreak could slow down. In a report on Tuesday, Goldman Sachs FX strategist Isabella Rosenberg wrote, “While the market has largely viewed the oil shock as an inflation and trade condition event, a shift in focus to greater downside risks to growth could suppress the general appreciation of the dollar against G10 currencies.” Analysts stated that in a tightening scenario led by stock market concerns, the yen and Swiss franc, as safe-haven currencies, would see the largest gains against the dollar. The report also pointed out that concerns over growth risks would significantly worsen the outlook for emerging market currencies. Although Goldman Sachs still believes the dollar will appreciate against G10 currencies in this scenario, it may be difficult for the dollar to sustain the surge seen in March.
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