EDITOR NOTE: A bit of critical contention toward this article, it’s true that the dollar has seen a steady decline since April, but in contrast to the author’s analysis below, this flight from the dollar doesn’t necessarily indicate complete “risk on” sentiment. The stock market has been rising, and perhaps many mainstream investors are piling into it. But gold and bitcoin have also been rising, indicating flows into smart money (gold) and speculative money (bitcoin) that’s nevertheless mistrustful of the dollar. Unless you’re the Robinhood type, you’re probably hedging your wealth with sound money or non-fiat assets. And if that’s the case, it’s likely the right thing to do, as the dollar is slated to lose even more of its value in purchasing power if not price.
As COVID vaccines roll out and a long-awaited US economic aid package looks increasingly likely, investors are piling into the kinds of assets that do well when times are good - and that's not the US dollar.
The dollar has fallen by nearly 4% so far in the fourth quarter, its weakest performance in the final three months of the year since a 6.4% loss in the fourth quarter of 2003, and the losses look unlikely to slow any time soon.
"After a substantial multiyear rally, the US dollar appears rich versus other alternative "safe haven" currencies such as the euro and yen, which have become increasingly attractive," PIMCO said recently in its annual outlook.
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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.