Dollar is again in demand even though a recession threatens the global economy.
Currently, the USD index is trading at the level of 99.4 points, having risen by more than 0.5%.
Being a safe-haven currency, dollar was able to defeat other currencies, especially since the people fear that the damage of the pandemic to the global economy is long and lasting.
According to IMF experts, the upcoming global recession may be the deepest since 1930.
"We expect that by the end of 2020, the GDP of developed countries will decrease by 6.1%, and of developing ones by 1%. India and China, on the other hand, will be able to maintain a positive trend. If quarantine measures are extended even after the second quarter of this year, and the virus, albeit on a more modest scale, attacks again in 2021, the negative impact to the global economy will be even more severe," they said.
IMF estimates that global GDP will fall by 3% this year.
However, neither this threat of a deep recession, the disappointing reports in the US labor market, nor the increase in daily mortality rate in the country, discouraged investors from buying US stocks.
Apparently, they remember that the rally of stock indices usually starts long before the end of the recession, so they are afraid of missing it.
Thus, speculators were forced to get rid of the dollar, so, by April 7, net shorts for USD on the futures market increased to the highest level since May 2018.
The US currency was under pressure because of the unprecedented measures the Federal Reserve has taken. Moreover, the mortality rate of coronavirus also affected it. Now, even though there are signs that the pandemic is receding in the US, analysts warn that it is too early to withdraw from safe haven assets, as the threat to public health is still present.
"The worst is yet to come, and the market will again face challenges. In this case, risk aversion will increase, which will allow the dollar to strengthen again," Ulrich Leuchtmann from the Commerzbank said.
"Dollar was temporarily knocked out. Recent trade patterns suggest that the currency is traded inversely with risk appetite. However, the rollback on the previous USD rally is still not strong enough to say that there has been a dramatic change in the trajectory," Saxo Bank experts noted.
"When we get out of the crisis, the market will have to deal with basic data and uncertainty of exit strategies. Therefore, we expect another jump in the US dollar," TD Securities said.
