Concerns arouse that dollar will weaken further as U.S. COVID-19 cases spike

New warning signals about a potential weakening of the U.S. dollar emerged Monday when a Deutsche Bank analyst said the greenback’s value could fall further as COVID-19 cases continue to rise.

Deutsche Bank analyst Sameer Goel on Monday questioned whether currency traders will continue paying a premium for the dollar as a “pandemic safe haven” given the new waves of COVID-19 cases in the United States even as Europe’s economic reopening is moving ahead.

The “emergency dollar demand seems to be waning,” Goel told media.

He said traders may believe the U.S. strategy for exiting the pandemic is “poorer than it is for the rest of the world. Our mobility tracker suggests that, bulk of Europe, for example, is opening up faster than (the) U.S. is.”

A weakened U.S. dollar could mean rising prices for food, gasoline and other staples at a time when U.S. consumers are facing record-high unemployment due to the fallout from the pandemic.

More than 36,000 new COVID-19 cases were reported in the United States on Sunday, a third consecutive day in which at least 30,000 new infections were logged across the country.

The dollar began a swift and significant decline three months ago with the onset of the coronavirus pandemic, falling more than 5 percent from 102.8 in March to around 97 last week in the dollar index, which compares the U.S. greenback to a basket of peers.

That brought a warning from Wall Street bank Goldman Sachs last week stating its foreign exchange strategists believed the decline was “just the beginning of a larger structural downtrend in the greenback driven, in part, by a further recovery in the global economy.”

The analysts estimated the dollar may fall more than 20 percent from its recent peak, putting it at 84, which would be its lowest level in five years.

The dollar index stood at 97.1 as of Monday morning.

Pic Credit: https://pixabay.com/photos/covid-19-coronavirus-corona-virus-4931496/

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