Next year, the dominance of the dollar will decline due to the grim economic prospects of the United States and weakening global demand for the American currency.
This is evidenced by a survey of 70 financial analysts conducted by Reuters.
The survey was conducted starting from June 1, because, as the media emphasize, the opinion of experts is not connected with the second wave of the coronavirus pandemic. At the same time, there are other reasons for the weakening interest in the dollar. One of them is the decision of the Federal Reserve System to flood the markets with liquidity. As a result, the dollar already fell by almost 1% last month, which is the worst figure since December 2019.
Against this background, 80% of analysts said that in the next six months the dollar will be at a “turning point”, since the “bears” prevail on the exchange – bidders who make money on a falling market. In addition, according to Reuters, currency speculators, who only in May increased their trading volume against the dollar to a two-year high, further increased their rates against the backdrop of an unfavorable situation.
Gavin Friend, senior financial strategist at NAB Group, stressed that no dollar growth is foreseen in the near future, in particular because of the US “playing with the virus and chronologically lagging behind the rest of the world.”
“The dollar grows in two cases: when you observe a risk or when a situation arises when the US is conducting a global recovery, and we do not think that this will happen in the near future,” the expert said. “The dollar has been overestimated; it has been overestimated for too long.”
At the same time, analysts note the strengthening of the euro, which in June grew by 1.2% against the dollar. As noted by Mitsubishi UFJ Financial Group’s currency strategist Lee Hardman, the outlook for the European currency “has significantly improved” in comparison with recent months.
“This makes the euro more attractive and profitable compared to the dollar. We do not insist that the euro rises higher, we just say that after the weakness that we have seen in recent years, there is a possibility that this weakness will begin to recover, ”Hardman explained.