Bearish Trend to Dominate in US Dollar Despite Recent Strengthening

A recent Reuters poll forecasts an extension of bearishness in the US dollar despite the recent strengthening seen over the past few session

Arslan Butt•Friday, February 5, 2021•1 min read

A recent Reuters poll forecasts an extension of bearishness in the US dollar despite the recent strengthening seen over the past few sessions. A majority of economists polled expect the greenback to trade within a range or weaken further over the next three months.

Through the last year, the US dollar lost around 7% of its value against other major currencies, driven lower by the Fed’s decision to bring interest rates down close to zero and maintain its monetary easing for as long as it would take for the US economy to rebound. However, since the beginning of this year, the reserve currency has regained some of its strength, climbing higher for four out of the past five weeks and gaining back more than 1% of its value.

Most economists see this recent bullishness as a transient occurrence, maintaining the outlook from last month’s edition of the poll that the dollar could trade weak in 2021. Over 85% of the poll respondents see the greenback to hold around current levels or trade bearish over the coming three months.

Currency speculators continue to bet against the dollar, even though some of their shorts were trimmed during the past week. The reserve currency’s weakness is expected to be driven by the Fed’s outlook that economic recovery in the US could take longer – which could keep the central bank’s dovish policy in place for the coming months and possibly even years.

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ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.