Fri, January 27, 2023

The Greenback: To Rise or To Fall? | Wibest Broker

The Greenback: A pile of hundred dollar bills.

On the second day of 2020, the greenback measured 96.215 against a basket of currencies following a six-month low. This was a slight recovery after its 1% loss over the past week against the sterling and commodities currencies.

The Chinese freed up over $110 billion in liquidity for the domestic banking system after Beijing loosened its monetary stance. Its central bank cut its reserve requirement ratio.

The monetary policy pushed the country’s stock index to its highest in nearly two years.

Trump’s need for re-election will lead to a pause in the economically damaging trade war with China.

Similarly, the Chinese PMI fell to a three-month low, but its impact was softened by an increase in industrial profits.

Meanwhile, the euro was steady at $1.1210.

The Greenback’s Demise… or Rise

Despite the greenback’s recent growth, analysts claim the American currency will only decline further this year. The Bloomberg Dollar Spot Index slid 2% in December as the biggest decline in almost 2 years.

Starting its decline in October, the US-China conflict continues to undermine the American currency. Monetary decisions following suit contributed to it even further, including three interest rate cuts throughout the year.

The Federal Reserve cut its benchmarks in July, September, and October to compensate for slowing economic growth. Even after these cuts, the Fed reportedly has “more room to move lower in 2020,” according to London’s M&G Investments.

National Australia Bank Ltd is also looking for a slump for the greenback, but says there wouldn’t be a sudden sell-off. Instead, they’re looking for more of a slow, low grind.

Ray Attrill said the dollar will start 2020 overvalued, falling in a “relatively sedate fashion.”

Contrarily, Citigroup claims the greenback will strengthen against the euro and the loonie this year. Goldman Sachs said that only a rise in the euro and the yuan can cause the dollar to decline.

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