Why US dollar will survive the test of coronavirus pandemic
- The recent dollar sell-off raises questions about confidence in the world’s dominant currency, but the fact remains it has no peers as a reserve asset
- The woes of the US economy notwithstanding, the dollar will bounce back, as it has always done
Whatever its detractors might say, the US dollar will never be supplanted as the world’s foremost reserve currency without a massive change in the global monetary order. It’s all down to historical precedent, market dominance, liquidity and trust.
In the current coronavirus crisis, the Federal Reserve can keep printing as many dollar as the US economy needs for recovery purposes, and the world still seems happy to mop up the surplus cash. No other currency comes close as a trusted currency reserve pillar right now.
The dollar might have had a tough run in the past few weeks, but it’s within the usual ebbs and flows of normal trading behaviour.
Traders might be taking a dim view of the dollar’s short-term prospects due to worries about the US government’s recent handling of the coronavirus crisis, deepening domestic political risks, the weak US economy and the Fed’s bias to easier monetary policy ahead. But, for longer-term investors, the dollar continues to tick all the boxes of a highly prized currency.