SMM: the dollar index fell below 92 on Monday, a 27-month low and down more than 10 per cent from its 2020 peak. At the same time, the market is full of bearish forecasts on the dollar, and institutions such as Goldman Sachs, UBS and Societe Generale all expect the dollar to continue to fall.
Aaron Hurd, a senior investment adviser at State Street Global, said that the dollar is already in transition to a bear market, which will not happen immediately in a few weeks, but we think the dollar index could depreciate by 15 to 20 per cent over the next five years.
Ulf Lindahl, chief investment officer of AG Bisset, even thinks the dollar will depreciate 36% against the euro in the next year or so, the lowest level in a decade. The decline in the dollar has slowed in recent weeks. "it's really an opportunity to get rid of the dollar."
According to a previous survey by Bank of America, 36% of fund managers said shorting the dollar was the best currency transaction in the second half of the year, and nearly half of the respondents expected global dollar reserves to decline next year.
The dollar may "fall endlessly" under pressure from multiple factors.
Relatively strong economic growth prospects outside the United States, extremely low interest rates in the United States and concerns about fiscal deficits caused by the epidemic are all behind the depreciation of the dollar.
The TD Securities (TD Securities) said the Fed's revised "inflation averaging" would put pressure on the dollar as it indicated that interest rates would remain low and the dollar was about 10 per cent overvalued against other major currencies.
"Today, there is widespread speculation that the dollar will collapse and lose its status as a global reserve currency," said Michael Gayd (Michael Gayed), a Toroso Investments / ATAC Rotation Fund portfolio manager.
But at the same time, some institutions believe that a reversal in risk appetite or good news for the US economy may support the dollar. Rick Reid (Rick Rieder), chief global fixed income officer at BlackRock (BlackRock), expects the dollar to fall only slightly. Dependence on the dollar in world trade and business may prevent the dollar from plummeting.
In some ways, the depreciation of the dollar will have some positive impact on the market, increasing the profits of US exporters and making it easier for countries to repay their dollar-denominated debt. But at the same time, a continued decline in the dollar will also send a negative signal, reflecting market scepticism about US fiscal and economic growth, and further weakening the dollar's status as a "world currency".
It is worth noting that although the dollar has continued to depreciate recently, this is not the case for all countries. Some emerging countries have been hit hard by the epidemic, and the dollar has depreciated against their currencies, rising more than 20 per cent against the Brazilian real and more than 10 per cent against the Mexican peso and the Russian rouble since March.
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