US Dollar Trades Close to a Monthly High as Biden Inauguration Nears
Early on Tuesday, the US dollar is trading strong, holding near the highest levels seen in a month, in anticipation that the next US Treasury Secretary Janet Yellen could adopt a more traditional approach towards maintaining currency rates. At the time of writing, the US dollar index DXY is trading around 90.58
President Donald Trump had repeatedly criticized the strength of the US dollar as the reason that held back the US from gaining a competitive edge in international trade. However, Yellen and the new Biden administration could revert to a traditional forex policy that could potentially strengthen the currency in the near future.
After witnessing considerable weakness towards the end of 2020, the US dollar gained almost 2% of its value since the beginning of this year, buoyed by the prospect of more fiscal stimulus by Biden. President elect Joe Biden has unveiled a proposal for an additional $1.9 trillion worth of stimulus to jumpstart the US economy and offset some of the economic damage driven by the ongoing coronavirus crisis.
Through 2020, the greenback had lost around 7% against its major peers after the Fed cautioned that low interest rates and dovishness would last longer until employment and inflation levels in the country improved to pre-pandemic levels. However, Biden’s talks of more stimulus has helped investors regain some of the confidence in the dollar while unwinding of bearish positions in the currency have also contributed to its recent rally.
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