The U.S Dollar bounce back after one of the biggest sell-offs in recent years is gaining momentum. Growing concerns that the global economy is slowly plunging into recession has triggered an increase in demand for the greenback, given its safe-haven status. Conversely, the dollar continues to strengthen against the major currencies.
U.S Dollar Strengths
The U.S dollar index, which measures the strength of the dollar against other major currencies, is closing in on the $100 level. A rally past the psychological level would come a week barely after the greenback plunged after a rally to three-year highs of $103.
The Australian dollar was down by 0.2% in Wednesday trading session against the U.S Dollar. The New Zealand dollar also dropped by 0.3% against on dollar strength. The Euro also lost some ground against the dollar plunging 0.3% to $1.1010. The U.S dollar also gained 0.2% against the Japanese Yen to 107.74.
The global economy is on edge as the coronavirus pandemic continues to cause havoc around the world. With virtually all economies around the world at standstill, there are fears that a global economic recession is inevitable. Talks that the coronavirus pandemic could kill as many as 240,000 Americans despite the measures put in place, has forced many people to rush to safe havens to store their wealth. Conversely, Dollar strength stems from its safe-haven status.
Dollar Dumping Concerns
However, dollar gains may be limited by the policy measures that the Federal Reserve is plotting as it seeks to avert the U.S economy plunging into recession. The U.S central bank has already pumped millions of dollars into the system in a bid to calm the markets.
The FED is currently allowing foreign central banks to exchange their U.S treasury securities. It has moved with speed and purchased bonds at an unprecedented rate. MUFG Bank analyst Minori Uchida does not expect the dollar to rise back to three-year highs, given the amount of dollars pumped into the market by the FED.