FX168 Financial News (North America) News In the past year or so, with the efforts of Federal Reserve Chairman Jerome Powell and the Federal Reserve System, the US dollar has been a very strong international currency. One of the reasons for the strength of the dollar is investor confidence in the Fed’s ability to maintain the market value of the dollar. But since last week, the dollar index has fallen continuously, approaching the lowest level since March 11. The euro/dollar climbed all the way from 1.09 last Friday (May 26) to 1.117 yesterday (June 2).
One of the reasons for the fall of the dollar is the gradual recovery of the global economy. Michael Mackenzie wrote in the Financial Times, “The reasons for the depreciation of the US dollar are many and varied, but the main driver is that the reopening of the economies hit by the virus has paved the way for risk aversion. Road.” The gradual recovery of global economic activity has made investors more optimistic about the economic outlook and will gradually transfer assets to higher-risk investment areas. MacKenzie believes that “the selling pressure facing the US dollar is increasing, and other currencies, commodities and stock markets around the world have seen a broader rebound.” Caitlin Ostroff (Caitlin Ostroff) reported in the “Wall Street Journal” : “Investors have sold dollars and started to buy more risky currencies…”
Another reason that may be overlooked by more people is the shift in political sentiment. Since the protests and riots in Minnesota, all recent market turmoil-related incidents have occurred in the United States. This protest and riots have spread all over the world, making it difficult for investors around the world to ignore the impact of this political event on the market. Steven Erlanger wrote in The New York Times, “With the burning of American cities and the spread of coronaviruses, these incidents have caused more deaths than any other country. President Trump is overseas. The problems caused are becoming more and more serious. He has never been isolated and neglected, even mocked.”
The consequence of all these events is that investors may lose confidence in the US government’s ability to maintain its dollar status. If investors lose their trust in the US government and the US government loses political support internationally, the status of the US dollar as the world’s reserve currency may be seriously threatened under the increasingly serious world situation, and the value of the US dollar is at stake.