US dollar has been under pressure over the past six months due to the massive level of coronavirus related economic devastation in the United States. The greenback has lost a lot of value against the euro and other major currencies, but analysts believe it’s just the beginning of a declining story.
The US dollar could fall almost 36% against the euro this year, according to the chief investment officer of currency manager A.G…
“The greenback’s recent weakness “is the beginning of a very large move” that could hurt the droves of investors exposed to it through their holdings in U.S. stocks and bonds,” A.G. chief investment officer Lindahl said.
Short positions on the US dollar have recently hit the highest level in a decade and data shows that hedge fund managers are bearish over the future fundamentals of the greenback. The US dollar is currently trading around the 27 months low against the euro. The dollar reported a fourth straight daily decline on Monday.
After losing almost 10% of the value from this year’s peak, the latest slowdown in the dollar’s decline is presenting an exit opportunity for investors in Lindahl’s view.
US dollar index is currently trading below the 92 levels and it is down around 5% year to date. Federal Reserve chairman Jerome Powell’s speech at the Jackson Hole Economic Symposium added to bearish sentiments.
The chairman kept the interest rates in the zero range and announced that inflation could move higher from the targeted 2% level. The fed is looking to increase the cash inflow into the economy by offering easy loans to businesses and consumers. This strategy would help in achieving a high employment level.
“Even if U.S. central bankers are likely to be pleased about the interpretation of their measures, it is not good news for the dollar”, Commerzbank analysts commented.
Euro soared above the 1.19 level against the US dollar on Tuesday. The rally in the common currency is mostly due to the greenback’s weaknesses.