Goldman Sachs: Energy Shock to Support Dollar Strength and Push Up Interest Rates

Goldman Sachs Group's latest report points out that, affected by the energy price shock, the US dollar will strengthen further in the short term and drive interest rates to remain high. Strategist Karen Reichgott Fishman stated that the combination of rising inflation and economic resilience has led to yields being "higher for longer," and if the energy crisis continues, it will exacerbate changes in trade conditions and promote the US dollar's appreciation against G10 currencies across the board.

Fishman advises investors to go long the US dollar against the Swedish krona, the euro, and the British pound to hedge risks. She emphasized that the US, as the world's largest oil producer, combined with high oil prices, may force the Federal Reserve to raise interest rates next year, highlighting the US dollar's safe-haven attributes.

The inflow of safe-haven funds has become a key support for the US dollar. Since the US-Israel joint operation that shook the energy market in February of this year, Brent crude oil prices have skyrocketed, and market concerns about the stickiness of inflation have intensified. The ongoing risk of blockages in the Strait of Hormuz also contributes to the rise in oil prices, and on Tuesday, the Bloomberg Dollar Spot Index recorded its largest gain for the month.

Fishman also warns that long-term foreign exchange interventions are unlikely to be effective unless macro policies change. She notes that the Japanese yen, as a key currency driving the strength of the US dollar, the expectations for its policy adjustments are not clear, suggesting that the US dollar's strength against the yen may continue.