Many experts continue to voice concerns about a second wave of coronavirus. They warn that this new wave is highly likely to be more devastating for the world economy. Not only does it pose great threats to the world economy's revival but it also may worsen its prospects significantly.
What is more, the next coronavirus wave will deliver a severe blow to the US dollar as well. Stephen Roach, a former chief economist at Morgan Stanley Asia, gave the gloomiest forecast for the US currency. He argues that the US dollar will lose almost a third of its value against the main world currencies next year. If this scenario comes true, there will be a noticeable drop in domestic savings from 5% to 10% of national income. Economists at Deutsche Bank share the same view on the fate of the American currency. Given the fact that unlike other countries, the US does not have a clear strategy on how to curb the pandemic. Curiously enough, even the leading banks of other countries, e.g. Russia's Sberbank, also agree that a second wave of coronavirus will seriously affect both the US business activity and the national currency.
The Fed's current policy also weighs on the greenback. The regulator is unable to provide enough stimulus measures for the US dollar due to the coronavirus woes. Some economists believe that the Federal Reserve may resort to the yield-curve-control policy. Last time the central bank adopted such a policy framework was during the Second World War and several times after it. This approach will help control the yield of government bonds. Therefore, the Fed will avoid large purchases of securities and target short-term maturities. In addition, the Fed will be able to keep financial conditions loose even in an environment of tighter monetary policy.
