Bank of America Sees U.S. Dollar Strengthening in H2 2026, Cites Three Key Drivers

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According to Bank of America's FX trading team, the U.S. dollar is expected to continue strengthening in the second half of 2026, buoyed by three main factors: geopolitical tensions in the Middle East supporting high oil prices, strong capital flows driven by the AI boom attracting overseas investors, and higher-than-consensus interest rate expectations. BofA strategist Alex Cohen noted that the Fed may raise rates three times in 2026, compared to the market's current pricing of just one hike, which would typically favor the dollar. The bank views these factors as mutually reinforcing rather than independent drivers, with potential to sustain the dollar's uptrend beyond a temporary rebound.
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