After the United States central bank policy meeting, expectations that the global economy will recover swiftly from the coronavirus pandemic took a beating. Thus, on Thursday, the dollar rose from a three-month low, which it hit in the previous session.
The Federal Reserve signaled that it plans years of extraordinary support for the United States economy. The policymakers are projecting that the economy will shrink in 2020, by 6.5%. Furthermore, they forecast that, at the end of this year, the unemployment rate will be at 9.3%. Also, there are forecasts that, until the end of 2022, interest rates will remain near zero.
Over the previous two weeks, dire projections took the wind out of a broadening rally in the stock markets. This sent investors scurrying to the relative safe-haven appeal of the Swiss franc, greenback, and yen.
The dollar edged 0.2% higher to 96.3 against a basket of its rivals. Asian stocks weakened, and the United States stock futures fell more than 1%. Thus, the dollar recovered from a three-month low overnight.
Dollar and Others
After five weeks of declines, a new round of infections in the United States showed a slight increase. Thus, market sentiment also took a hit. Only a part of those cases was attributed to more testing, according to a Reuters analysis.
Marshall Gittler is head of Investment Research at BDSwiss Group. He said that the risk of a second wave outweighed the zero-forever message by the Federal Reserve. Moreover, the forex market took a distinctly risk-off mood, with a typical reaction.
High-beta currencies were heavily geared toward global growth. For example, the Norwegian crown and the Australian dollar led the losers in the forex space. In early London trading, they decreased by 1%.
Rodrigo Catril is an FX analyst in Sydney at National Australia Bank. He said that this had only been a follow-through. Overall, it has played a broad rebound for the dollar.
