It appears that the US dollar has been dealt yet another gloomy fate amid the disastrous consequences of the coronavirus pandemic. Speaking to CNBC, global head of research at Standard Chartered Bank Eric Robertsen is warning that the greenback is headed for considerable depreciation within the next several years.
Although the US dollar has been the subject of significant appreciation fueled by the outperformance of US assets over the past decade, that trend is likely to reverse amid the pandemic. Robertsen points out that the deterioration of US domestic policy, coupled with global shifts in trade will cause the dollar to cascade downwards.
Given that the US has foregone its interest rate advantage relative to its G-10 counterparts, the probability for a multi-year dollar depreciation has tremendously increased. Moreover, the outcome of the upcoming presidential elections will have a strong impact on the path of the dollar, with a blue wave ultimately forecasted to lead to a depreciation that will be clear and pronounced. Conversely, Robertsen predicts that emerging market currencies and assets will fare exceedingly well in the event of a Democratic win.
The dollar index, which monitors the greenback relative to a basket of other currencies, sits at 92.9 which amounts to a loss of nearly 3% since the beginning of the year relative to its peers. Robertsen’s forecast comes after Yale University economist Stephen Roach made a similar prediction, calling for a greenback valuation decline of 35% by the end of 2021.
Information for this briefing was found via CNBC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.