The dollar’s declining trend over the past months has prompted investors and market analysts to think. Some experts predict that the dollar’s downward movement will continue, while others argue that this decline will not have major effects.
The dollar, which investors saw as a safe haven in the early stages of the pandemic, climbed to its highest level in the last 3.5 years. However, this performance did not last long as the coronavirus did not weaken and the US lowered interest rates, and the dollar rapidly depreciated. Most market commentators worry that the dollar will lose its reserve currency status, although it has recovered somewhat over the past week. The dollar index showing its lowest rate in 27 months and declining to 92,477 reinforces the concerns of experts. At the beginning of March, this rate was 102.
Investors Give Up Dollars
According to CNBC’s report, Patrik Schowitz from JPMorgan Asset Management; He thinks the American economy has been seriously injured by the Coronavirus. Believing that the effects of this will be felt for several years, Schowitz; He stated that the gap between the economies of America, Europe and Japan may close in favor of Europe and Japan in this process. Global strategist Schowitz argues that the dollar, which could not offer investors more advantage in terms of interest rates, is losing its trend and investors are turning to different currencies by giving up the dollar.
Schowitz says that the 750 billion euro rescue fund announced by the European Union also encourages investors to the euro. The dollar has lost 6.6% against the euro since the beginning of June. In addition, BlackRock Investment Institute points out the continuation of the depreciation of the dollar, arguing that the reasons that weaken the dollar are still continuing in parallel with Schowitz’s statements.
The Dollar’s Fall Is Overrated
As the other side of the coin, some experts argue that the depreciation of the dollar is greatly exaggerated. One of them, Capital Economics’ economist Jonas Goltermann, attributes the dollar’s fall that started in March to low interest rates and steps to stimulate Europe’s continental economy. Goltermann emphasizes the jump in March, arguing that the coronavirus crisis has reinforced the dollar’s role as a global currency.
Saying that there is clearly no alternative for the dollar, Goltermann also mentions the inadequacy of the great economic powers that came after the USA. Goltermann said that the euro is still very fragile due to its close relationship with European political dynamics and the yuan cannot compete with the dollar due to China’s political system and capital control policies; He suggests that neither of these currencies can exceed the dollar.