The U.S. dollar is poised to further weaken, amid market views that geopolitical risks are falling after the election and that the next stimulus package will likely be smaller than expected, according to analysts.
Citi Private Bank strategists predicted a weaker dollar ahead, given that a Biden administration would reduce uncertainty in international trade policy.
“Victory for President Elect Biden means a return to more conventional governance. As the province of the President, it will result in a major shift in the way foreign policy is conducted. Alliance building will return. ‘Tariff threat first’ negotiating tactics will end,” the bank’s chief investment officer, David Bailin, and Steven Wieting, chief investment strategist and chief economist, wrote in a note published Monday.
That will benefit much of the world’s financial markets, especially in emerging markets, they said.
“Perhaps the greatest clarity post-election is for global trade. US foreign policy will enter a more predictable phase without escalating tariff threats. We see a declining US dollar, and rising emerging markets as highly likely,” they wrote.
On Friday, the U.S. dollar index, which tracks the greenback against a basket of its peers, hit a low of 92.456 – its lowest level since September 2. Following projections over the weekend that Joe Biden has won the U.S. presidential election, the dollar continued diving sharply to around 92.162 on Monday.
In Asia trading on Tuesday, however, it bounded on Pfizer vaccine hopes to last trade at 92.813 — but still below the 94 level seen earlier this month.
Reference: CNBC
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