Dollar weakness will extend to 2021 amid persistent search for risk | ECONOMY

The dollar weakness is likely to extend for another six months as investors continue to shift to riskier and more profitable assets, a Reuters poll of analysts showed.

After the bullish streak in stocks in November, the dollar – which benefits from situations of economic uncertainty – depreciated almost 3% last month and marks a decline of almost 6% this year, leaving the currency on track to its worst annual performance since 2017.

Despite the fact that there are around 14 million people in the United States infected with the coronavirus, hope for new economic stimuli and vaccines will keep stocks at high thresholds, while the dollar will continue to decline in the medium term.

It is expected that the Federal Reserve Give markets renewed momentum by detailing how your bond purchases will go ahead to provide support for the US economy, which could hurt the dollar.

More than two-thirds of analysts – 51 out of 72 – who responded to a separate question expect the dollar’s downtrend to last at least until mid-2021. The remaining 21 respondents said the currency would reverse course before then. dates.

These results are in line with November polls showing global stocks will continue their current rising pace for about six months or more, according to a majority of analysts.

“You cannot have a dollar so overvalued, it is as simple as this. The dollar had and is still significantly overvalued by almost any measure and I think that was the result of the divergence of monetary policies.”, Explained Kit Juckes, Head of Forex Strategies at Societe Generale.

Despite this scenario, the role of the dollar in global payment systems will prevent it from depreciating too much. Most of the currencies that have made significant gains against the dollar in 2020 are unlikely to repeat the feat in 2021.

The euro, which has gained more than 8% this year, is expected to slow its bullish trend and trade at around $ 1.20 in the next three months.