A critical measure of the US currency dropped to an over six-month low as momentum rose after the greenback pared a key technical region late Friday, while the Japanese yen soared against all its counterparts.
The Bloomberg Dollar Spot Index was down Friday to its weakest mark since January 7 and was poised for a fourth consecutive weekly decline. It has plunged over 8 percent from a high in March when haven seekers had lined up for the USD during the height of the financial slump brought about by the coronavirus pandemic. Some analysts are now estimating an extended period of sluggishness in the American currency.
The greenback retreated to its lowest mark in almost two years, as investors continued to unload the currency on predictions an increase in COVID-19 cases will make it hard for the U.S. economy to outperform its peers.
In contrast, the euro currency advanced to its highest mark since October 2018 after topping the technically significant $1.16 level late Wednesday and climbed for a fifth consecutive session against the USD, still relishing the European recovery fund that was given the green light earlier this week.
According to Mazen Issa, senior currency planner at TD Securities in New York, the U.S. currency is "hanging by a thread... at this point, the USD-weakness mindset has become deeply entrenched," Gertrude Chavez-Dreyfuss quoted Issa as saying in his Reuters report.
A host of elements are responsible for the U.S. dollars continued drop. For years, estimates that the United States would outperform other economies kept the currency up against many of its counterparts.
That gap in performance is seen to contract as European Union leaders bagged a major bailout plan earlier and have been generally successful in their efforts to curb the virus. Meanwhile, outbreaks across large areas of the United States have all but dashed optimism of a quick economic rebound in the country.
Investors have turned on the greenback in the face of negative rates in the U.S. and on bets the central bank will maintain its policy accommodative to revive the U.S. economy. It does not help that frictions between China and the U.S. are growing, while COVID-19 infections have resurged in the U.S. at a time when local jobless insurance is skyrocketing and five-year yields registered record lows.
Cases of the coronavirus have surpassed the 4 million mark in the U.S. late Thursday, with more than 2,600 new infections every hour on average being reported, the highest rate in the world, a Reuters tally showed.
