The Dollar Spot Index (DXY) fell by 0.7% today to the lowest level in more than two years on the biggest drop in almost four weeks. The Dollar Index is now down 5.28% for the year and down 12% from its March peak
The euro surged 1.2% to $1.2075, the highest level agains the dollar in more than two years on the largest jump in about eight months. The Japanese yen was little changed at 104.30 per dollar.
The dollar’s tumble is a result of the Federal Reserve’s promise to keep U.S. interest rates at their current extraordinarily low level well into the anticipated economic recovery and data showing that economies such as China are coming out of their coronavirus growth slumps before the United States. The dollar’s decline reverses its gains earlier in the year when investors and traders looked to the U.S. currency as a safe haven in global uncertainty. The feeling now seems to be that there’s less need for any safe haven.
Perversely enough, the arrival of successful coronavirus vaccines is likely to push the dollar lower: growth in the U.S. economy would rebound but the need for a safe haven currency would decline even more.
The consensus is that the dollar has further to fall. Citigroup, for example, sees the dollar dropping by as much as 20% in 2021.
Gold, which would normally be a beneficiary of a weaker dollar, was up 2.15% in futures trading (February 2021) on the Comex in New York to $1810.20 an ounce today. But gold has been in decline since August 5 when it peaked at $2069 an ounce. An absence of inflation and that sentiment of “Who needs a safe haven?” have punished this store of value.
