Dollar Rate Rise Shows That It Is Still a Safe Haven
The rise in the dollar rate shows that it is still a safe haven. Preparing to close its strongest week since April, the
dollar rate is still seen as a safe asset.
During the coronavirus epidemic, the movement in the US dollar, which has lost value against important money all summer, reveals why it is still seen as the most basic safe harbor.
Some investors resumed purchases after moving away from the dollar due to the expansionary policy of the
US Federal Reserve (Fed), causing a decrease in short positions. While the USA, which maintains its leadership in the number of cases and deaths, started to take control of the epidemic in some regions, liquidity, interest advantage and the absence of an alternative enabled the dollar to regain value and increase the interest of investors.
The Bloomberg Dollar Spot Index is preparing to gain more than 1.5 percent this week. The benchmark index could record its strongest five-day rise from April so far.
Technical indicators, on the other hand, indicate that more value gains may come. The dollar rate fell more than 10 percent from its highest level in March to the year's low in September. Hedge funds are expecting a drop in the dollar for the first time since May 2018.
"The US dollar will be the preferred safe asset until new information about vaccination, corporate profits, selection and incentives is available," said Thomas J. Hayes, head of the Hedge fund Great Hill Capital LLC in New York. He said “It saw the short term bottom. "
However, previously recorded data indicates that it is far from certain that the increase will continue. The dollar rallied in June as well, but quickly returned its gains as concerns about global economic developments subsided.
"The Fed's long-term low interest rate strategy will likely put pressure on the dollar," said T. Rowe Price portfolio manager Quentin Fitzsimmons.