US Dollar dropped to the lowest level in the last twenty-seven months on Tuesday amid trader’s concerns over the US-China trade war and economic recovery. The USD index slid for the fifth day in a row and it is down almost 7% in the last six months.
The dollar has lost its ground since the Federal Reserves has slashed interest rates and started interrupting the financial markets by allowing them to lend more money to businesses and consumers. The Fed’s strategy has increased the demand for risk assets to all-time high and reduced investors’ confidence in safe-havens.
“It’s the Fed, it’s all the liquidity being pumped into the market,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets, about the fall in the dollar.
Net bearish bets have been increasing on the greenback over the last few months. Last week, bearish bets jumped to the highest level since May 2011.
“Longer-term, we see dollar weakness as US debt grows, and the global recovery gains momentum. Near term, the dollar may strengthen with uncertainty during flu season,” Eric Bright, managing director at Bel Air Investment Advisors, said.
Euro soared sharply against the US dollar. EUR/USD pair is currently standing around the highest level in the last twenty-six months.
The market investors have been showing confidence in European markets. This is because they believe European leaders have managed economic and virus-related challenges better than the United States. The common currency has breached the 1.19 level on Tuesday. The next resistance level is 1.20.
Gold price is struggling to cross the $2000 level. The market analysts claim that yellow metal is likely to remain strong in the days to come because of weaknesses in the US dollar along with concerns over the US economic situation.