The U.S. dollar rally has much further to run, and could help out countries dealing with excessively low inflation, a report from HSBC argues.
The dollar index, which measures the strength of the greenback against the major currencies, has risen near 7 percent this year, amid positive economic data out of the U.S. and increased expectations that as the U.S. Federal Reserve ends its massive bond-buying program, it will hike interest rates.
But the rally has only just begun, analysts at HSBC said in a note published this week, who argue the greenback should rein supreme as the world's strongest currency both this year and next.
"The current U.S. dollar rally is unlike any we have seen before...[the rally] so far has only been roughly 5 percent yet history shows a 20 percent rise would not be implausible," the analysts said.
And the dollar's relative strength could be the perfect antidote for other global economies, such as the euro zone, struggling to fend off the threat of deflation, said HSBC. The single currency union this week saw its annual inflation rate fall further below the European Central Bank's target of 2 percent in September to 0.3 percent.