[ad_1]
Black clouds gather over the US dollar, which had its weakest week in March amid fears that the Federal Reserve press, rather than government spending, could be used to support the economy following Tuesday’s election, according to Reuters. quoted by Mediafax.
A potentially divided US administration, with Republicans controlling the Senate, could mean a smaller package of tax incentives, as well as increased pressure on the US central bank to increase the bond purchase program and other sustained economic support policies. from the dollar. .
Democrat Joe Biden won the US presidential election, providing some certainty after days of mixed reports on who could lead the White House in the next four years. At the same time, Democrats could gain more influence in the Senate, fueling hopes for a broader fiscal stimulus package.
These concerns stem from problems that have depreciated the dollar for most of 2020 and have caused some investors to worry about its status as the world’s dominant reserve currency, including expectations that low interest rates will follow; massive US government spending for years.
The US currency has lost about 10% from its highs for the year and is close to its two-year low. Its decline spurred the growth of assets, which some investors see as alternatives to the dollar, such as gold and bitcoin, which rose 4% and 12% respectively this month.
Fed Chairman Jerome Powell said Thursday that the central bank has pledged to keep bond purchases at a constant $ 120 billion per month, but said lawmakers will likely need to provide more tax incentives to help the economy. will recover earlier from the coronavirus-induced contraction.
A weaker dollar is welcome for many American companies because it makes it cheaper to convert earnings while stimulating the competitiveness of American products overseas.
But at the same time, the value of other currencies is increasing, complicating the efforts of the eurozone and Japanese economies to stimulate growth and potentially causing other central banks to depreciate their own currencies.
The euro gained around 6% against the dollar this year, while the Japanese yen gained around 5%.
Momtchil Pojarliev, head of currencies at BNP Asset Management, believes the dollar will drop to an all-time low in the next three months.
Some disagree. John Floyd, head of macro currency strategy at Record Currency Management, says that while the Fed has said it will keep asset acquisitions at current levels, the European Central Bank recently signaled that it could increase its economic support in December. “It’s a big difference,” he said.
.
[ad_2]
Source link
