How much could the price of the dollar continue to fall and why would that happen?

The fall of the dollar has much more way to go, according to the exchange rate forecaster with the best result in the agency’s most recent ranking Bloomberg.

(See: The Colombian peso, the fourth strongest currency in the world in March).

The Italian MPS Capital Services Banca per le Imprese SpA, which is part of the banking group that includes Banca Monte dei Paschi di Siena SpA, earned first place in Bloomberg’s accuracy rankings for the first quarter of 2023. And now, MPS chief strategist Luca Mannucci warns that the dollar it could plunge as much as 5% against other currencies in the second half.

The prediction is based on his opinion that The United States will fall into a recession, a situation that will likely be fueled by the Federal Reserve’s (Fed) aggressive fight against inflation and the lingering risk of the recent banking turmoil.

The Bloomberg Dollar Spot Index is already down 1.6% year-to-date and is down about 10% from the all-time high in September.

(See: The reasons for the recent fall in the price of the dollar in the country).

The latest movements occurred in the midst of mounting pressure on the Fed to stop raising interest rates and the increasing risk of an economic downturn.

“We expect a US recession by the end of the yearMannucci said in an interview.The tightening of monetary policy will drag down the economy“, he added.

At the same time, he warned that the bankruptcy of several US regional banks, as well as the saga surrounding C.redit Swiss Group AG, it will also lead to a tightening of credit conditions and hurt the economy.

The cooling of US economic data during the first week of April revived fears of a recession.

According to Mannucci, the Fed is likely to only raise rates by one more quarter point, while the European Central Bank could opt for at least two more quarter point hikes.

The expert assured that this will contribute to the dollar falls around 3% against the euro in the coming months.

The dollar could also fall against the yen if the bank of japan ends up relaxing the yield curve controls, which would lead toat dollar-yen rate to 120 by the end of 2023, according to Mannucci.

(See: The ‘hits’ that oil is giving to the price of the dollar).

In the case of Colombia, It must be said that, in March, The Colombian peso was the fourth strongest currency in the world against the dollar, according to data from Bloomberg: promptly, the national currency appreciated 4.85% against the US.

And so far in April, the peso continues with an upward trend: only in the first three days of operations of the fourth month of the year, between Monday the 3rd and Wednesday the 5th, it cut more than 70 pesos and was left with a Representative Market Rate (TRM) of 4,571.91 pesos (until Monday, April 10).

(See: The dollar does not stop falling: it lost more than 70 pesos in Easter).

BLOOMBERG AND PORTFOLIO