US Dollar Still Weak Over Concerns About Economic Recovery
The US dollar is starting the fresh trading week on a bearish note, holding close to the lowest level seen in a week, as worries mount over possible delay in economic recovery in the US in the wake of the coronavirus crisis. At the time of writing, the US dollar index DXY is trading around 90.32.
The dollar had started this month on a positive note, trading at a two-month high, buoyed by strong economic data releases and rising hopes for more fiscal stimulus to further speed up recovery in the US economy. However, a weaker than expected NFP report sent the greenback lower as traders feared that the world’s most powerful economy could take longer to rebound from the pandemic-induced damage.
Analysts had earlier predicted an extended period of weakness for the US dollar into 2021 on the back of Fed’s commitment to maintain monetary easing and low interest rates. However, encouraging economic data releases since the beginning of this year and the rollout of the COVID-19 vaccines across the country had boosted expectations for a more rapid recovery than in most other parts of the world, especially Europe.
In addition, there are also mixed feelings among traders that more stimulus and a faster recovery for the US could drive global reflation and increase the appeal for riskier instruments over the US dollar. This means that a sustained recovery in the US economy could dent the safe haven appeal of the greenback and keep it under pressure.
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