Dollar Set for Weekly Win, but Experts Warn Dark Days Will Return

Forex
© Reuters.  © Reuters.

By Yasin Ebrahim

Investing.com – The dollar rose on Friday, and remained set to end the week in the green following stronger-than-expected economic data, but some experts have warned the reprieve for the greenback will likely be short-lived.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.47% to 93.12.

The Commerce Department said existing home sales in July to a seasonally adjusted annual rate of units., topping forecasts for a 14.7% rise.

A survey of U.S. business activity also helped to ease fears about slack in the economic recovery.

IHS Markit data showed flash Composite Purchasing Managers’ index of 54.7 for August, above forecasts of 51.3.

The greenback has come under pressure in recent months as the spread of coronavirus, which has since eased, spiked across the U.S.

But the damage the second wave of the virus has had on the economy will continue to weigh and force the Federal Reserve to continue with stimulus measures, threatening to send the dollar on a wild swing lower again.

“Although infections with the Covid-19-virus have now stabilized in the US, the relatively rapid outbreak of a second wave of the virus there has clearly tarnished the image of the dollar as a safe haven,” Commerzbank (DE:) said.  

With the Federal Reserve in the midst of tweaking its forward guidance to link monetary policy to the achievement of concrete macroeconomic goals, investors continued to expect that the Fed would stick to its “expansionary monetary policy much longer than was the case after past crises,” the bank added. “This in turn would require a reassessment of the market, especially of the dollar versus the euro. “

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