The dollar has dropped on Wednesday in comparison with the world’s six most important currencies in international markets, while “riskier” currencies strengthened thanks to a greater risk appetite of investors.
The US dollar index, which shows the value of the US against the six most important world currencies, was minus 0.3 percent around noon compared to the previous closing of trading, at 89.73 points. In overnight trading, it briefly recorded a new low in two and a half years, slipping to 89,711 points.
At the same time, the euro strengthened 0.25 percent against the dollar, to $ 1.2282. The dollar also weakened nearly 0.4 percent against the yen, to 103.13 yen (103.24 on 01/02/2021).
Just last week, U.S. Senate Majority Leader, Mitch McConnell, blocked a vote to increase the proposed amount of aid to citizens by $ 1400. However, it is to be expected that the Senate will soon adopt the proposed measures, but the question remains to what extent.
Investors remain optimistic hoping that an agreement on fiscal stimulus (expected on Monday) will stabilize the demand for the dollar.
But some analysts assume the dollar to weaken further in 2021 as newly elected US President Joe Biden is expected to insist on additional measures to support the US economy.
It is not clear how Biden, who announced the fight against coronavirus as a priority, would support domestic production and create millions of jobs if the announced measures negatively affect the value of the dollar.
In his political career, and especially during his senator days in the state of Delaware, Biden often warned of an increase in the deficit, which he vehemently opposed. However, things have changed, and Biden is planning to further increase the budget deficit by $ 2.1 billion.
Biden’s plan is to increase the deficit he fought against to $ 5.4 billion through a package of measures over the next ten years.
It is also important to mention oil prices that have slipped in international markets below the $ 51 level, caused by concerns about the spread of a new strain of coronavirus.
In any case, the Biden administration is facing a difficult period in which it will have to choose the best option to save the economy and protect oil and the dollar from further declines.