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Start of a multi-year downtrend for the US dollar?

Asia Analytica
Asia Analytica8/7/2020 06:31 AM GMT+08  • 7 min read
Start of a multi-year downtrend for the US dollar?
Of late, however, there appears to be a reversal in growth expectations, driven by the country’s worsening outbreak, the likelihood of more fiscal spending and rising deficit as well as extremely dovish comments from the Fed.
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Recent US data may suggest rising odds that the economic recovery is at risk of slowing or, worse, stalling, with the resurgence in Covid-19 cases, but stocks continued to march higher. The Standard & Poor’s 500 index is back in the black year to date, rebounding 51.8% from the lows in March and is just 1.9% from its all-time record high. The positive sentiment is driving global stocks higher.

Stocks are but one class of assets that are rallying. Gold is currently trading at the priciest it has ever been, breaking above the US$2,000-an-ounce mark last week. We would not be at all surprised if prices continue to rise (see Chart 1).

Amid worries of faltering economic recoveries, geopolitical uncertainties and fears that the massive liquidity being created will eventually result in runaway inflation, gold is a safe-haven asset — especially now with historically low interest rates translating into barely any holding cost.

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