The US currency, having calmed down a bit after the recent strong rally in financial markets, has turned to the role of a protective asset again. After a speech by the head of the US Federal Reserve, Jerome Powell, which presented a semi-annual report, investors turned to the assets of the "safe haven" again, in particular to the dollar.
This currency continues to maintain leadership among safe financial instruments. For investors, USD is a real island of reliability, a safe marina in every sense of the word. According to experts, this is especially noticeable against the backdrop of the recent storm in the financial markets, when its fluctuations bordered on the absurd. IDuring periods when risk appetites soared in two jumps from the local minimum to a confusing growth, it is the dollar that gives confidence in the preservation of capital.
Analysts explain such disorder in the markets both by Fed's statement related to changes in the purchase of corporate bonds and the Bank of Japan's expansion of purchases. Against this background, on Tuesday, June 16, the EUR/USD pair showed multi-directional dynamics. At the same time, the European currency grew a little due to the relatively positive statistical reports of ZEW, but the US currency had it tough.
After the comments of the Fed chairman, the dollar gained confidence and increased noticeably, but this rise is holding back the general drawdown of the EUR/USD pair. Amid the speech of the head of the Federal Reserve, the classic pair collapsed by 0.7%, to 1.1241. The downward trend continued on Wednesday morning, June 17, when the EUR/USD pair was trading within 1.1242–1.1243. Nevertheless, the pair managed to gain impulse and entered the upward spiral. Afterwards, the EUR/USD pair reached 1.1275 - 1.1276 and intends to rise.
The rise of the US currency which has significantly increased in price relative to the currencies of developed countries, was not only caused by the speech of J. Powell. Another factor that spurred a sharp surge in the dollar's interest was the geopolitical military hotbed in Asia. Current geopolitical issues are related to the Sino-Indian conflict and the worrying situation on the Korean Peninsula. Long-standing issues were on the agenda, which have now become more active. Thus, experts are not sure whether it will be possible to extinguish these foci quickly enough. Experts do not undertake to say whether they contribute to drastic changes in the market, but a surge in anti-risk sentiment has already occurred. On this wave, the dollar rose, which still feels confident in the role of a protective asset.
Another source of support for the dollar was the actions of the American government, which intends to allocate $ 1 trillion to restore infrastructure. Economists do not exclude that this amount may be included in the next package of measures to assist enterprises affected by the COVID-19 pandemic. This circumstance was in the hands of the USD, becoming an additional confirmation of its reliability and strength. The dollar, like a ship, began to confidently swim in the financial sea again.
On the other hand, JPMorgan's currency strategists added a small problem. Despite the wave of investor interest in the US currency, they believe that its reliability is in question due to increasing risks. Among the factors that could destroy the stability of the dollar, experts include long-standing mass protests in the United States and high chances for Democrats to win the upcoming presidential election. The bank said that they can deliver a sensitive blow to USD hegemony in the medium-term.
Many experts find it difficult to predict how long the dollar will remain attractive as an asset of the "safe haven". A turmoil can be expected in the near future, and the USD will have to use all resources to overcome obstacles. However, experts are confident that the dollar will continue to be sustainable and unsinkable in the most difficult circumstances. Analysts summarize that it will cope enough with any market surprises.
