The coronavirus pandemic has wreaked a whole lot of economic crises in several regions of the world including the U.S. this year. FasTrading experts noted that one of the most affected instruments in the US is the US dollar and that there are lots of speculations that Wall Street doesn’t expect the US dollar to gain more strength any time soon.
The slump in the strength of the US dollar can be attributed to a few factors that would be discussed shortly. Before then, however, the FasTrading experts noted that the dollar has slumped by almost 12% against other strong top currencies of the world since when it peaked in March.
Moreover, the US currency dipped to its lowest point last week- the first of its kind since April 2018. According to the FasTrading experts, below are some of the few factors responsible for the slump:
1. Central Bank Policy:
As a result of the pandemic and increased unemployment rate, the US Federal Reserve has decided to keep interest rates very low and continue to print out money to stimulate the economy. Though this response to the pandemic from the Federal Reserves is geared towards rejuvenating the economy, it’s still responsible for the weakness in the dollar.
2. The Forthcoming Biden Era:
The forthcoming Biden era is expected to usher in new policies and many of which are positive for global growth but quite negative for the dollar. In recent years, tariffs have been a huge contributor to a stronger dollar such as penalties on exports from countries like China; however, it’s speculated that Biden will depend more on other tools instead of tariffs.
3. The Hope for Global Recovery:
Investors across the globe are already hoping for a better economy come 2021- putting their confidence in the up-and-coming arrival of safe and effective vaccines. Here is the twist, a strong US and global economy tend to make the dollar weak because the dollar remains a safe-haven currency.