US Dollar Continues Downswing - Forex News Roundup
Forex News Roundup: US Dollar Continues Downswing, Lose-Lose Trend Consolidates
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In this edition, we focus on why the US Dollar (USD) has continued to fall against many of its currency rivals, and look at how some other currencies are faring.
USD Continues to Fall
The US Dollar fell marginally against the Euro (EUR) and most other major currencies towards the end of the week, as the worrying state of the economy and the country's handling of the COVID-19 crisis continued to weigh on the Greenback's strength.
Economic data released late in the week underscored the severity of the US' economic slump, with its gross domestic product (GDP) having a bad second quarter of 2020.
Furthermore, with many states across the country still reporting thousands of new coronavirus cases each day and troubling numbers of COVID deaths it seems likely that many key economic hubs will remain on lockdown for at least the next few weeks (possibly much longer.)
Until recently, the US Dollar appreciated against G10 currencies and Emerging Market (EM) currencies whenever the pandemic or the economic crisis it has brought about worsened, as the Greenback is considered a safe haven asset which is therefore favored by investors in times of economic uncertainty and difficulty.
So, whenever bad news came to light, demand for the USD increased at the expense of other currencies, leading to the Dollar appreciating.
However, this trend has seemingly disappeared and reversed in recent weeks, with the Greenback now suffering a downswing in response to the release of poor economic data or a worsening of the pandemic.
It's not entirely clear why this has happened, but it seems it has to do with gold taking over as the safe-haven asset of choice. So, whenever such an adverse event happens, investors are now moving their money to gold at the Dollar's expense, and concerns about the US economy and question marks over how long a recovery might take drag the Greenback down.
Gold has performed very well throughout 2020, and it is now over 22 percent up so far this year and it seems this is why investors are now favoring gold over the USD.
Instead of simply purchasing an asset that is considered stable and won't lose its value in times of crisis, they are now investing in an asset that can deliver very impressive returns amid the pandemic.
JPY's Strength Against USD Being Monitored By Japan
Japanese Finance Minister Taro Asos said on Friday that they are monitoring the Japanese Yen's (JPY) current levels of strength against the Dollar, emphasizing that stability is "important".
The Yen recently reached its strongest level against the USD in 4 months, primarily due to the turbulence the Greenback has been facing due to the aforementioned factors.
Japan, which had negative interest rates even prior to the pandemic, is seemingly concerned about the Yen's growing strength against the Dollar, but it is yet to announce any measures to address the situation.
A Quick Summary
- The USD's continued downswing seemingly confirms it is losing its status as the safe-haven asset of choice.
- Gold is now considered a more favorable investment, as it has performed very well over the course of the pandemic.
- Japan is monitoring the Yen's strength against the Greenback.