A confirmation that as many as 3.3 million Americans applied for unemployment benefits is the latest catalysts fuelling a sell-off of the U.S dollar. The greenback had risen to two-year highs last week but has since crumbled, amidst growing concerns about the health of the world’s largest economy.
The dollar has since lost ground against other major currencies that are also under immense pressure amidst the impact of the COVID-19 pandemic. High levels of unemployment triggered by lockdown’s across various States’ are the latest tailwind that should continue to weigh on the dollar strength going forward.
The last time that the U.S registered a record number of unemployment was in 1982. However, the 3.3 million figure reported last week is nearly triple the previous record. The figures essentially underscore how the US. The economy is grappling with the spread of the coronavirus that has taken a toll on various sectors of the economy.
Dollar weakness could soon become the order of the day as the greenback had initially risen to two-year highs even as other currencies continued to edge lower in response to the coronavirus pandemic. Weak economic releases should continue to weigh in on the dollar strength even as the Federal Reserve continues to implement a string of stimulus package designed to avert a further slowdown of the economy.
The dollar index, which measures the strength of the dollar against a basket of other major currencies, has since pulled lower from the 103 highs. A plunge below the 100 marks continues to affirm the strength of the downside pressure.
Weakness in the U.S Dollar has, on the other hand, triggered demand for other safe havens as investors turn to other options to store their wealth. Gold has since emerged as an ideal safe haven amidst the economic turmoil around the world.
After plunging below the $1500 mark on the U.S dollar strength, the yellow metal has rallied by more than $100, consequently taking out the $1600 mark. Further weakness in the greenback should continue to elicit strong demand for gold.