Until recently it seemed that the economy of the us dollar fell in the wake of events caused by COVID-19, but has managed to maintain its value in the Forex market. How is this possible?
To the contrary of what was expected, the dollar gets stronger, based on the recent increase of cases of infections by coronaviruses, ascending to 38,000 cases identified yesterday. There have been several flagella that allowed the american currency to be placed through the top of the market in terms of stability.
The 36,000 cases detected are not very far from the highest number of registered hiv infections in the united states, that are 36.426 infected. By this, the government took economic measures to assist small, medium, large companies and families, with the aim to relieve some of the shortage of income from the massive layoffs during the quarantine period.
FED, more foreign exchange and increase in supply: More demand of the dollar?
The Federal Reserve of the united States shocked the community Forex with a considerable injection of dollar to the market.
Funded the government with money for the plans of the financial help of the state, commonly referred to as blow-inflationary, but in this case, it was different.
Surprisingly, occurred as a reaction not as expected by the market, where we observed a revaluation of the dollar, and also a slight strengthening. Why does this occur?
Due to the coronavirus, there are economic havoc around the world.
Then, the community of Forex saw this action of the FED an opportunity of escape, a temporary shelter to store their money safely, bringing with it, at the same time as the offer, an increase interesting in the demand for the currency.
Unexpectedly, the dollar has managed to strengthen themselves and draw the attention of investors in the midst of the pandemic.
The market price and the production
Within general guidelines, the dollar imposed its mark in the Forex market, giving a small step forward with respect to their peers. Drove back to the Euro until 1,1251 dollars and the Pound Sterling to 1.2423 dollars. With respect to the Yen, the dollar soared to 107,05 yen from the minimum of a month and a half 106,075 yen recently reached.
The IMF further reduced its forecasts of global production by 2020 seeing that the damages caused by COVID-19 are deeper and wider than was previously thought.
Although government stimulus cushioning the blows initials of the pandemic on businesses, in order to survive the closures, investors fear that a recession in-depth to prevent the companies to recover quickly.
Bob Prince, Co-director of Investments Bridgewater Associates, said that the efforts stimulating the US could support the cash flows of companies in the summer, but that’s probably the economic risk of the pandemic spreading.
Does the dollar remain strong? How will companies overcome this difficult stage?