John Woods: US Dollar Valuation «Has Now Normalized»
Investors have been concerned about the US dollar in 2025, which has delivered its worst performance in decades. According to Lombard Odier’s John Woods, there is currently less reason to worry as the greenback's valuation «has now normalized».
Year-to-date, DYX – an index that measures US dollar value relative to a basket of foreign currencies – has dropped by over 10 percent, marking one of the worst performances for the greenback in decades. This has led many to rethink allocations in the world’s reserve currency and the prospects of de-dollarization.
While the decline in 2025 has been steep, the DXY is currently around the same level as in 2022 and according to John Woods, Lombard Odier’s chief investment officer and head of investment solutions for Asia, this is currently less reason for concerns.
«[The dollar] is kind of back to where it was pretty much since 2022-23 in the so-called pre-election period,» he explained during a media briefing attended by finews.asia. «The valuation has now normalized and in my mind, that I think is consistent with the typical ebb and flow of currency valuations.»
Continued Weakening Expected
Nonetheless, Lombard Odier expects the US dollar to continue weakening with a forecast of three interest rate cuts by the Federal Reserve.
«Also, [there is a] desire by the government in the United States to drive the value down lower so it can become more of a manufacturing center,» Woods added.
Emerging Markets FX
Within currencies, Lombard Odier is overweight on emerging markets FX, driven in part by dollar weakening and the historical trend that this leads to flows elsewhere.
«The currencies of Asian economies, particularly those driven by equity inflows in Thailand, Singapore to an extent, Hong Kong all tend to benefit and my sense is they will continue on this basis as well,» Woods explained.
The bank is also neutral in gold, believing that the precious metal has already peaked and will likely trend sideways for the time being.
