Conference Board chief public policy economist Joseph Minarik and Bankrate chief economic analyst Mark Hamrick will respond to the latest news from Federal Reserve Chairman Jerome Powell.
The U.S. dollar fell Thursday to a more than 2.5-year high against a basket of peers after the Federal Reserve pledged to keep interest rates low so the economy shows signs of a steady recovery.
The dollar index fell 0.71% to 89.72 on Thursday, the lowest level since April 2018. The greenback has fallen 13% since COVID-19 locks began in mid-March and is down 6.6% am- year. Closures below 88.50 would be worse from November 2014.
The dollar is trading at / near multi-year highs against major currencies including the euro, Japanese yen, Australian dollar and Chinese Yuan. A weaker dollar not only makes American-made products cheaper for overseas buyers, but it also makes imports more expensive for U.S. consumers.
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“The dollar has gone lower against almost every currency in the world today,” wrote Marc Chandler, chief market strategist at capital markets trading firm Bannockburn Global Forex.
The sale comes a day after the Federal Reserve said it would maintain the size of its $ 120 billion monthly asset purchase program until “further progress” is made in achieving maximum earnings targets and price stability.
The central bank on March 15 lowered its federal currency rate to near zero to help combat the strongest economic slowdown in the post-World War II amid home-stay orders aimed at slowing the transmission of COVID-19. .
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The Fed cut its key level by 150 basis points in March, as well as taking other steps, to ensure credit flows through the economy.
“The decline in U.S. currency interest rate gains over its G10 counterparts” has been the reason for the dollar’s decline, wrote Mark Haefele, chief investment officer of UBS Global Wealth Management. The spread between US and German 2-year output has shrunk to 90 basis points from 215 bps.
Also contributing to the weakness of the dollar is the decline for safe havens after the discovery of the COVID-19 vaccine and the prospect of another round of fiscal stimulus.
Lawyers on Capitol Hill are close to negotiating a $ 908 billion bipartisan COVID-19 relief package. The aid, which is split into two separate bills, if passed, could extend $ 748 billion towards unemployment benefits, Paycheck Protection Program funding and direct payments to individuals and Another $ 160 billion for government and state funding and liability protection for businesses.
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Further fiscal stimulus is likely to “keep the US debt focused,” Haefele wrote, noting that all the ingredients are “in place for further dollar weakness.”
Haefele will see the dollar fall from its current level of 1.2265 per euro to between 1.25 and 1.3 by the end of 2021 as the Fed does not start tapering its asset purchase program ahead of other central banks, it believes which does not seem to be the case.