New York, January 1st In 2020, the U.S. dollar exchange rate went down across the board due to the impact of the U.S. economic recession and the implementation of ultra-low interest rate policies by the U.S. Federal Reserve. At present, the market has reached a consensus that the dollar will continue to weaken in 2021.
In March 2020, the Federal Reserve announced the launch of “uncapped” quantitative easing, cutting interest rates for a total of 150 basis points twice, which exceeded market expectations in speed and extent, triggering a sharp depreciation of the dollar.
In addition, with the EU’s agreement on a 750 billion-scale recovery fund in July, the deepening fiscal integration of the EU has boosted investor confidence in the EU and the euro.
The euro weakness, which has lasted for many years, ushered in an opportunity to reverse, and the euro-dollar exchange rate rose significantly.
Looking forward to 2021, Jimo, chief economist of Greater China of Lianbo Group, an American investment management company, said that the dollar will remain weak considering the difficult recovery of the U.S. economy.
Several agencies predict that by the end of 2021, the exchange rate of the euro against the US dollar will rise from the current 1:122 to 1:1.25.
Morgan Asset Management believes that the attractiveness of the dollar as investment currency has weakened, and the 10-year bull market of the dollar will end.
Mark Hafell, global chief investment officer of UBS Wealth Management, said that the sharp contraction of currency spreads between the dollar and other major economies, the double budget and current account deficits of the United States, and the expansion of the global economic recovery are challenging the dollar, a safe haven currency.
Santiago Espinoza, strategist at the MRB Partnership, a macroeconomic research institute, believes that the dollar is currently oversold and there is a potential technical rebound in early 2021, but the dollar rebound will eventually prepare for the next cyclical decline.
In 2021, the euro, the Japanese yen, the Singapore dollar, the Swiss franc and a basket of emerging market currencies are most likely to strengthen against the dollar.
However, Bank of America’s Global Research Department said that although it agreed with the market consensus of bearish on the dollar, if the U.S. economy recovers relatively smoothly, U.S. fiscal policy is expected to tighten, and the dollar may have limited room for further decline.
