Coronacrisis and its impact on the dollar and euro
The pandemic that swept the planet last year changed traditional processes and introduced new trends. The world is still only adjusting to them, but it is already clear that in a number of segments the situation has changed dramatically. For instance, the coronacrisis has shown weak sides of the dollar, so many analysts recommend investing in euros. Also buying currencies of raw-materials countries is a promising way to preserve and increase capital. This claim is based on the principles of global economic recovery whereby countries need more raw materials and this leads to the growth of demand for them.
According to analysts from the investment company Univer Capital, the Australian dollar is an interesting option. Experts note that the world’s way out of the coronacrisis will be carried out at the expense of both strong and weak currencies. Therefore, do not expect any one currency will show a huge strengthening. Moreover, it can lead to a decrease in the competitiveness of the economy of a given country, which nobody wants.
However, the United States clearly controls the processes that take place in other countries and their currencies. A striking example is China, where the yuan is showing excellent dynamics of strengthening. In case the currency weakens considerably, the U.S. may impose sanctions, arguing that there is a risk of currency manipulation.
Therefore, there is no reason to talk about a tangible increase in activity on currency markets. So far, countries are interested in weak money, but are limited in their actions due to pressure from the U.S.
A separate topic is the growth of the euro, which only last year showed a strengthening against the dollar by about 25%. And according to forecasts, this trend will continue in the near future. The reason for this situation on the market was the pandemic, which caused serious damage even to the leading economies in the world. Europe is no exception; its GDP has fallen by 7.2%, but at the same time the Euro remains one of the most reliable currencies of G10. Experts blame this on the aggressive policy of the U.S. which has increased the deficit in the country’s budget as a result of the introduction of various measures to stimulate the economy. Despite such mechanisms to maintain the market, the EU has managed to strengthen its currency. Now many investors see it as a more reliable asset than the dollar.
Another promising option are the yen and the Swiss franc. They have a stable exchange rate and can be seen as a less risky investment. That said, it pays to evaluate all the risks associated with both the dollar and the euro, and to understand that the situation can change.