Research Team at Nomura, notes that the USD has experienced the most rapid appreciation since the early 1980s, with the broad USD index appreciating by almost 25% between mid-June 2014 and January 2016. Key Quotes “The size and the speed of this adjustment has affected the timing of the Fed liftoff and the expected pace of policy normalisation because of its impact on the US outlook. With the Fed expected to continue to normalise monetary policy, but with currently few hikes priced in by financial markets, this should be positive for USD. However, USD is unlikely to repeat its past performance, partly because commodity currencies are unlikely to repeat their sharp falls. This will leave the rate differential as the main driver for USD. If we assume market expectations will reprice the pace of the Fed path towards policy normalisation (100bp of hikes per year), the broad USD index could appreciate by about 11% in 2016. Because of the impact such an appreciation would have on the Fed’s outlook, this scenario looks very unlikely. Under a repricing towards our US economists’ expectations of 50bp of hikes this year and 75bp next year, the index would appreciate by around 7%.” For more information, read our latest forex news.