The dollar index hit a two-month high

On Tuesday, the U.S. currency hit a two-month high against the dollar index, reflecting the exchange rate against the six major currencies. Rumors of the collapse of the dollar are greatly exaggerated, experts say. Analysts admit that weakening sentiment against the dollar is weakening. The dollar remains resilient as the outlook for the euro area deteriorates. Concerns about prolonged quarantine restrictions in the euro area are putting pressure on the single currency, and optimism about US stimulus is supporting the dollar. Judging by the options market, the euro’s fall rates in the coming month have reached non-notic levels since June, writes ProFinance.

Pessimists cite as a reason for the dollar’s dissatisfaction with the incredible filling of the US money market during the corona virus pandemic. Never before in peacetime has the US budget deficit been as large and the amount of public debt is as huge as it is today. And the Federal Reserve has never lowered interest rates to this level before and has not increased its balance sheet so quickly, writes The National Interest (USA).

Will pumping the U.S. economy with dollars lead to the collapse of the U.S. currency? No, experts say. So far, there is no substitute for the dollar as a global reserve currency. After all, everything is known in comparison, and against the background of problems of the euro or Asian currencies, the good old dollar looks good.

The economic slowdown in Europe is much deeper than in the US and Europe has negative interest rates today. The continent is currently on the verge of the next stage of the euro area debt crisis, and this crisis threatens the existence of the euro.

is particularly worrying that the epicentre of the next euro zone debt crisis may be Italy, which has a 10 times larger economy than Greece. Never before has Italy had such a large budget deficit and such an unfavourable ratio of national debt to GDP.

There are other factors that support the dollar for the future. This is its reputation as a safe haven, as evidenced by very expensive capital markets. As global monetary policy shrinks today’s global asset market and the credit market bubble explodes, investors around the world will again be looking for a safe haven. And it is very likely that in times of financial turmoil this port will be re-u.S. government bonds.

“Raising money to fund support programs will pull liquidity from a market that plays in favor of the dollar. The foreign exchange market appears to have already switched to the Rubicon, at least on eurusd and USDJPY pairs, which have managed to exceed the 50-day average. Yesterday’s failure of the euro below 1.2050 could potentially open a direct path of 1.1900-1.1950,” notes fxPro’s analysis team.   

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