The US dollar will strengthen throughout 2021 for 5 key reasons, Bank of America says

The US dollar will strengthen throughout 2021 for 5 key reasons, Bank of America says

Uncertainties surrounding the US dollar's path in 2021 are fading and bulls might finally have their day in the sun, Bank of America said Tuesday.

Strategists led by Athanasios Vamvakidis boosted their forecast for the US currency on Tuesday, expecting it to strengthen to 1.15 dollars per euro by the year-end. The forecast compares to Wall Street's consensus of a 1.25 exchange rate.

A higher euro-dollar rate means a weaker greenback, as more of the US currency can be purchased with a single euro. The currency pair already trades at the bank's first-quarter forecast of 1.20, down from roughly 1.23 at the start of the year. The team already expected upside for the dollar later in the year, but now sees several reasons why such strengthening can arrive sooner.

Detailed below are the five reasons Bank of America expects the dollar to strengthen in 2021.

Read more: A wealth management research chief shares 6 stock-market sectors to buy as the country reopens and the economy experiences its 'best single year of GDP growth since 2000'

The Fed-ECB gap

After taking several actions to pump dollars into the struggling US economy, the Federal Reserve is starting to near the end of its ultra-easy policy stance. Some officials