US Dollar Ends 2020 on a Bearish Note, Weakness to Continue
The US dollar is all set to end this year on a bearish footing, sliding lower over uncertainties about fiscal stimulus measures in the US even as investors turn towards trading riskier instruments over hopes that the vaccine rollout and Brexit deal will support global economic recovery. The US dollar index DXY, which measures the performance of the greenback against six major currencies, is trading below the key 90 level as 2020 comes to an end.
So far this year, the dollar index has lost more than 7% of its value and is down by around 13% from its highest level seen this year. At the beginning of the pandemic when most countries were heading into lockdowns, the US dollar had soared to a high of 102.99 against its leading rivals.
Meanwhile, the signing of the Brexit deal late last week have sent the Euro and GBP higher. EUR/USD has strengthened by nearly 10% through this year, touching the highest levels seen since April 2018 and continuing to rise towards 1.2555 – the highest level of 2018.
The US dollar is likely to continue trading weaker in the near future as a result of deficits in budget and trade – signs that reinforce the weak condition of the US economy. Due to the “twin deficits”, the coronavirus relief package is also going to exert downward pressure on the reserve currency as it would drive US debt higher, even as President-elect Joe Biden has promised the rollout of more stimulus measures soon.
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