Continued Dollar Strength Forecasted

The Bank of Korea has indicated that the strong dollar trend is expected to persist into the early part of next year. This projection is based on a variety of economic factors and policy implementations that are currently influencing the global market.

Factors Driving the Dollar's Strength

Concerns over the stagnation of disinflation trends, primarily due to the Trump administration's policies, have heightened the likelihood of prolonged high-interest rates by the Federal Reserve. This scenario is anticipated to further bolster the dollar's strength. Additionally, the economic downturn in major exporting countries, exacerbated by U.S. tariffs, is expected to contribute to the dollar's dominance.

Future Outlook and Uncertainties

Despite the current trends, the Bank of Korea suggests that the strong dollar may ease in the future. The limitations in policy implementation and the impact of interest rate cuts in other countries are likely to play a role in this shift. The outlook for U.S. Treasury yields remains highly uncertain, with potential risks of short-term rate hikes or long-term rate falls depending on various economic factors.

Monetary Policy and Stock Market Predictions

Interest rates are expected to be cut by 0.25-0.50 percentage points next year, with the policy rate projected to be around 4.00-4.25% by the end of the year. However, the possibility of a smaller rate cut or a freeze cannot be ruled out. U.S. stock prices, which have seen significant growth, may face limitations in the new year, with potential adjustments in response to external shocks.

Impact of Trump Administration's Policies

The report also touches on the potential effects of the Trump administration's second-term policies, including an increase in the average tariff rate on Chinese products and its implications for U.S. inflation and economic growth. The uncertainty surrounding these policies remains high, highlighting the complex interplay between global economic forces and domestic policy decisions.