Doom would be exaggerated: Analysts: US dollar could fall further – status as reserve currency remains | message
Forex in this article
US dollar exchange rate could fall further
However, analysts do not expect the greenback to decline
So far no serious competition
During the Corona crash in March, the US dollar was still able to benefit from the flight of market participants to safe investments, but the question now remains how quickly the US economy can recover from the crisis. After all, the USA is one of the countries that has been hardest hit by the Corona crisis and the number of infected people continues to rise.
The US dollar is likely to decline further
Patrik Schowitz of JPMorgan Asset Management stated, as reported by CNBC, in a recent statement: “The economic outperformance of the US against the euro area and Japan seems to be (no longer) guaranteed, at least for the next few years in view of the weak virus reaction New 750 billion euro recovery fund of the European Union give investors more confidence in the euro as an alternative “. Since the reduction in his interest rate advantage makes the US dollar less attractive and forces investors to consider deposits in other currencies and these factors will not change in the near future, Schowitz expects the US dollar to continue to decline should.
Status as a key currency remains
But analysts believe that the US dollar will go under as being overdone. Jonas Goltermann, head economist at the research company Capital Economics, said that talk of the decline of the dollar was “greatly exaggerated”. The dollar index fell from 102 in March to a 27-month low of 92.477 in mid-August and the US dollar share of global foreign exchange reserves has declined in recent years, according to CNBC. But according to Goltermann, the decline in the dollar index over the past few months can be attributed to factors other than reserve currency status. As reasons, he cites, for example, low interest rates and the European measures to revive the European economy, which have triggered a considerable shift towards the euro.
According to the economist at Capital Economics, the corona crisis even strengthened the role of the greenback as a global key currency – which he justified with the fact that the US dollar, as mentioned at the beginning, rose as the number of cases increased in March and investors in droves in safe Ports fled.
Lack of competition
Goltermann can also see “no obvious alternative to the dollar”. “The next two largest economies, the Eurozone and China, are both smaller than the US, and the euro (due to its still fragile political foundations) and the renminbi (due to China’s capital controls and unique political system) have significant deficiencies as reserve currencies, ”CNBC recounts economists.
Senior investment strategist Sven Schubert from Vontobel Asset Management in Europe sees it similarly. He also regards the euro and the yuan as the two most profitable alternatives, although they are not yet “serious competitors”. “The depth of the USFinancial markets is unsurpassed, central banks still prefer to keep most of their reserves in USD, the world’s most important commodities are traded in USD and most global trade contracts are quoted in USD and EUR, “said Schubert.
If the analysts are to be believed, investors do not have to worry about the imminent decline of the global reserve currency at first, despite the ongoing weakness of the dollar.
Finanzen.net editorial team
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