The dollar's dominance will slowly melt away over the coming year on weakening global demand and a sombre U.S. economic outlook, according to a Reuters poll of currency forecasters whose views depend on there being no second coronavirus shock.
Despite fears a surge in new Covid-19 cases would delay economies reopening and stymie a tentative recovery, world stocks have rallied - with the S&P 500 finishing higher in June, marking its biggest quarterly percentage gain since the height of the technology boom in 1998.
Caught between bets in favour of riskier investments, weak U.S. economic prospects as well as an easing in the thirst for dollars after the Federal Reserve flooded markets with liquidity, the greenback fell nearly 1.0 per cent last month. It was its worst monthly performance since December.
While there was a dire prognosis from the top U.S. medical expert on the coronavirus' spread, the June 25-July 1 poll of over 70 analysts showed weak dollar projections as Fed Chair Jerome Powell on Monday reiterated the economic outlook for the world's largest economy was uncertain.
"The dollar rises in two instances: when you see risk off or when there is a situation where the U.S. is leading the global recovery, and we don't think that's going to be the case anytime soon," said Gavin Friend, senior FX strategist at NAB Group in London.
"The U.S. is playing fast and loose with the virus, and chronologically they're behind the rest of the world."
Currency speculators, who had built up trades against the dollar to the highest in two years during May, increased their out-of-favour dollar bets further last week, the latest positioning data showed.
About 80 per cent of analysts, 53 of 66, said the likely path for the dollar over the next six months was to trade around current levels, alternating between slight gains and losses in a range. That suggests the greenback may be at a crucial crossroad as more currency strategists have turned bearish.
But more than 90 per cent, or 63 of 68, said a second shock from the pandemic would push the dollar higher. Five said it would push the U.S. currency lower.
Much will also depend on debt servicing and repayments by Asian, European and other international borrowers in U.S. dollars.
While an early shortage of dollars in March from the pandemic's first shock pushed the Fed to open currency swap lines with major central banks, international funding strains have eased significantly since. In recent weeks, usage of the facility has reduced dramatically.
That trend is expected to continue over the next six months with major central banks' usage of swap lines to "stay around current levels", according to 32 of 46 analysts. While 13 predicted a sharp drop, only one respondent said use of them would "rise sharply".
The dollar index, which measures the greenback's strength against six other major currencies, has slipped over 5 per cent since touching a more than three-year high in March.
When asked which currencies would perform better against the dollar by end-December, a touch over half of 49 respondents said major developed market ones, with the remaining almost split between commodity-linked and emerging market currencies.
"The dollar is so overvalued, and has been overvalued for a long time, it's time now for it to come back down again, as we head towards the (U.S.) election," added NAB's Friend.
Over the last quarter, the euro has staged a 1.8 per cent comeback after falling by a similar margin during the first three months of the year. For the month of June, the euro was up 1.2 per cent against the dollar.
The single currency was now expected to gain about 2.5 per cent to trade at $1.15 in a year from around $1.12 on Wednesday, slightly stronger than $1.14 predicted last month. While those findings are similar to what analysts have been predicting for nearly two years, there was a clear shift in their outlook for the euro, with the range of forecasts showing higher highs and higher lows from last month.
"In comparison to even a month or two ago, the outlook in Europe has improved significantly," said Lee Hardman, currency strategist at MUFG.
"I think that makes the euro look relatively more attractive and cheap against the likes of the dollar. We're not arguing strongly for the euro to surge higher, we're just saying, after the weakness we have seen in recent years, there is the potential for that weakness to start to reverse."
Comments
Islam is not a religion to add membership to show the population.
It is a true religion to practice guidelines of only one creator Allah (S.B.T). Accepting and quitting Islam will not make any difference for true Muslims. One who understands his creator will not reject his religion even if he dies because his life starts after death which is unlimited. The life in earth is so short that we can compare to hotel stay for a day.
Rejecting Islam means he is rejecting his creator Al Mighty Allah and it doesn’t mean he is quitting from Islam
Islam is the second largest religion in the world only in Qty. where is true Muslim? very few in qty
Accepting Islam doesn’t mean becoming membership in Islam. It is accepting his creator and his guidelines to practice successful and peaceful life and thereby prepare for his permanent life which starts after his death.
For true Muslims there is no fear to die. because he is always prepared and waiting for his death
May Almighty Allah guide us True path and success.
This is really unfortunate. He has chnged in religion only to get the verdict in his favor. Suppose he wont get it, will he convert to Christianity or Budhism or Sikhism? Will the media give same preference in case he would have changed to religion other than Hinduism or if any Hindu converted to another religion. This issue is now on the top agenda of Media and they are publishing it by applying ghee + butter. None knows truth behind it. However this family will not succeed in this world and the life after death if they convert to other religion though none can force them to change the religion. Islam or Muslims will not lose anything if this family converts to another religion. But this family will lose and they will realise it sooner or later. Let us pray God to keep them on right path and not on the path of Sathan.
he would have converted to christinaty so he can get international help from devil DOnald trump or vatican pope, lol religion is your choice, but the main point here the god look at is your heart, how you treat mankind & how you obey GOD command, how to spend you money & how you live..people who worship idol will be throwen to hell forever there is no excuse and the punishment is very severe, if your an eithest there will be a change & it depend on GOD & also how you lived in earth.
The religion is set of law decreed by the CREATOR/ ONE AND ONLY GOD.
It guides from birth till death and showing how to be also succesful in the life after the death.
This is not how we think just to suite the temporary needs.
Before accepting or rejecting any religion, he should have thorough idea of its teachings.
Unless it is known, believed in it and practiced, we can not call him the follower of Hinduism OR ISLAM, OR Christianity OR whatever.
Like changing for personal temporary gains, has no meaning and not required they can live like aninals which have no religions.
The animals follow and do whatever easy for them.
God give wisdom to all
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