The U.S. dollar is predicted to continue its decline, according to UOB.
April was a volatile month for the USD, with rumors of de-dollarization spreading in the market. The focus was on the speculation surrounding the “Mar-a-Lago Agreement,” which was believed to include trade tariffs and a weaker USD. However, UOB suggests that the real reason for the USD sell-off – particularly its sharp decline against the New Taiwan dollar (TWD) – could be attributed to exporters offloading their USD holdings from export proceeds.
UOB maintains its view that the USD will further weaken against other major currencies. This will push the USD Index (DXY) below the 100 level into a new trading range, falling to 96.9 by Q1 2026. Meanwhile, UOB’s latest forecast predicts that EUR/USD and GBP/USD will continue to rise, reaching 1.17 and 1.39, respectively, by Q1 2026. For the AUD, the V-shaped recovery may have overextended, with gains expected to be more limited, reaching approximately 0.66 in Q1 2026. As for the JPY, with the Bank of Japan (BOJ) adopting a gentler pace of interest rate hikes, it is projected to gradually strengthen, reaching 140 USD/JPY by Q1 2026.
Regarding Asian currencies, while the intense volatility of early April has subsided, there are still risks that could hinder the region’s currency recovery. These factors include the uncertainty surrounding U.S.-China trade negotiations and the rapid appreciation of Asian currencies amid weakening economic and trade prospects in the region.
Overall, while UOB believes that the recent strong recovery of Asian currencies may be somewhat excessive, their forecast from the previous month has lowered the expected peaks for USD/Asia rates in Q3 2025, reflecting the possibility that the most intense phase of the trade war has passed. Accordingly, UOB forecasts USD/CNY to be at 7.32 in Q3 2025; USD/SGD, USD/MYR, USD/THB, USD/IDR, and USD/VND are expected to be at 1.32, 4.38, 33.5, 16,800, and 26,300, respectively.
Notably, the VND was a special case in the region’s strong currency recovery in April, as it depreciated by 1.6% that month to 25,990 VND/USD. The market may have reacted to the negative economic impact on Vietnam after the U.S. announced tariffs of up to 46% on Vietnamese goods – the second-highest rate globally, after China. The manufacturing PMI also fell sharply to 45.6, the lowest in two years, indicating manufacturers’ cautious sentiment amid concerns about Vietnamese goods losing their price competitiveness in the U.S., their largest export market. Unless a trade deal with the U.S. is reached, UOB believes the VND will remain in a weak range against the USD. The updated forecast for USD/VND is: 26,100 in Q2 2025, 26,300 in Q3, 26,000 in Q4 2025, and 25,800 in Q1 2026.
UOB expects the Fed to cut interest rates three times this year.
With regards to interest rates, UOB maintains its view that the Federal Reserve will continue to ease monetary policy. While the timing of the Fed’s rate cuts has been adjusted, UOB still predicts three cuts of 25 basis points each in 2025. The updated timing for these cuts is expected to be at the FOMC meetings in September, October, and December, bringing the policy rate down to 3.75% by the end of 2025.
Gold prices are expected to reach 3,600 USD/oz by Q1 2026.
Finally, in the gold market, safe-haven demand persists, along with central banks regularly increasing their gold holdings, expectations of a weaker USD, and the potential return of capital to U.S. gold ETFs. All these factors provide a positive backdrop for gold prices. Therefore, UOB maintains its positive outlook and raises its gold price forecast to 3,600 USD/oz by Q1 2026.
– 16:38 05/12/2025
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