US Dollar’s Safe Haven Appeal to Strengthen in Next Six Months: Reuters Poll
Arslan Butt • 1 min read
Even as the risk sentiment improves in global markets over hopes for additional stimulus measures and recovery in the wake of economies reopening, a majority of economists polled by Reuters anticipate that the US dollar could strengthen as a safe haven currency within the next six months. Hopes of economic recovery and stimulus support could be replaced by increasing worries about US-China tensions, which could impact the risk sentiment and drive a rush to the safety of the greenback all over again.
In recent weeks, the US dollar has been receiving fewer bids as traders turn their focus towards riskier and emerging currencies as countries emerge out of lockdown and restart economic activity. Prior to that, the dollar had strengthened as the coronavirus pandemic gripped world markets and raised fears of a deep economic recession.
The dollar’s safe haven status also took a beating with a renewed rally in global equity markets over increased hopes for monetary and fiscal stimulus efforts supporting economic recovery worldwide. Despite these encouraging indications, 29 out of 50 economists feel that the US dollar is likely to encounter downside risks over the next six months.
A resurgence in tensions between the US and China, ongoing instances of protests and riots across the US as well as the possibility of a second wave of coronavirus infections in countries that have reopened continue to weigh on the market sentiment. In addition, more than 70% analysts polled by Reuters expect safe haven currencies to return in focus in the coming months over intensifying of US-China tensions.