FX.co ★ USD may nosedive after massive vaccination

A massive vaccination campaign may save the global economy and lead to a significant drop in the US dollar. The greenback’s future highly depends on the paces of the economic revival.

Market sentiment improved amid the news about the final successful trials of coronavirus vaccines in the US and China. The global economy was looking forward to the vaccine as it may revive the international trade. However, a breakthrough in this sphere will cause the US dollar depreciation. Citigroup strategists suppose that the vaccine distribution will “allow the dollar to follow a similar path to that it experienced from the early to mid-2000s”. The fact is that in 2001, China joined the World Trade Organization. This triggered the multi-year downtrend in the greenback amid a wave of globalization and higher global trade volumes. Moreover, the Fed’s policy is likely to exert downward pressure on the US national currency. Extremely low interest rates will make investors avoid US assets in favor of the international ones. By the moment, the US dollar index has slumped against a basket of major currencies. Notably, in March, the index reached record highs.

Analysts recommend that investors focus on the EM currencies. For example, according to Goldman Sachs, the Russian ruble is the best performer in emerging markets. At the same time, it sees a drop in the US dollar by at least 6%. The bank also recommends opening long positions on the Mexican peso, South African rand, and Indian rupee.