The Dollar is at Risk from Growing Risk Appetite

The Dollar is at Risk from Growing Risk Appetite

The dollar is facing downward pressure as investors garnered a renewed confidence from an abrupt development on vaccine news. 

The unexpected smoother transition to the Biden administration also contributed to the pull. This is due to markets expecting a bigger stimulus package from the Democrat representative.

The US dollar index, which measures the performance of the world’s reserve currency against other entities in the basket, slashed 0.2%. 

It settled at 92.067, slumping to its two-month low against other riskier assets such as the Aussie and the Kiwi. It also closed to its lowest in two weeks against the EUR.

In the latest foreign exchange charts, the AUD/USD pair experienced a conservative reversal by 0.02% to 0.7359. It was shedding off gains recorded in an earlier session.

On the other hand, the NZD/USD added 0.08% to 0.6985. After which, investors unwind their prospects for further monetary easing on both locations. 

The Kiwi is currently priced just slightly below its strongest level since June of 2018. The Aussie, in the meantime, heads towards its multi-month high last recorded in early September.

In Asia, the Japanese yen and USD duo added 0.10% to settle above the support level in which it neared during the start of the week. The pair trades at 104.54 in the latest charts.

On the other hand, the onshore Chinese yuan weakened against its counterpart after edging down by 0.18% to 6.6779.

The prospect for a better relationship now that Joe Biden will take on the presidency continues to provide support for the renminbi.

In Europen, the pound is still showing a bigger upbeat mood than ever as it hiked by 0.02% to 1.3359, set to close to its highest level in the last two months.

The Dollar’s Dilemma

The successive events that transpired so far all turned out to be on the opposing side as the USD.

The ignited risk sentiment in the market is so strong that investors are willing to flee away from the asylum of the greenback.

Much of the bets are on riskier assets despite the still rampant problem with the pandemic.

According to analysts, next year will be the year for foreign exchange markets when the effects of Trump’s protectionist stance finally make its timely exit.

Similarly, that period will also mark the first year after the emergence of the Covid-19. Citizens by now have already grown accustomed to coexisting with the virus.

In a forecast, experts project that the dollar will decline between 5-10% from its current level by 2021 against other leading currencies.

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