The weakening U.S. dollar is set to slide even further, but its importance as the world’s reserve currency is unlikely to be diminished, according to analysts. The greenback had benefited as investors flew to safety amid the pandemic, which drove it to a three-and-a-half year high in March.
But now strategists say the country’s economic recovery is in question, given its weak coronavirus response. The dollar had also reacted to the country’s surging deficit and the prospect of U.S. interest rates remaining lower for longer.
The dollar index fell to a 27-month low last week at 92.477, a steep decline from its 102 level in March. Since then, it has been fluctuating, swinging between the 92 and 93 levels in the past week. It was last at 93.150 on Monday. BlackRock Investment Institute also said that dollar weakness will persist in the near term, as the factors that led to the currency’s recent decline will continue to play a part. Analysts argue, however, that recent fears that the dollar may lose its status as the world’s reserve currency are overblown.