FS Stapleton Alliance � Huge monetary and fiscal stimulus in the worlds largest economy will weaken the US dollar significantly this year say analysts.
The forecast comes as President Joe Biden settles into the start of his 4-year term at the White House faced with a multitude of challenges, including the need to give the worlds largest economy a major shot in the arm.
With control of the House of Representatives, the Senate and the White House, the Democrat is well-placed to push through his agenda, a centerpiece of which is a $1.9 trillion fiscal stimulus package that includes $1,400 payments for Americans to help them through economic problems related to the COVID-19 pandemic.
The package will be paid for by borrowing; that will be added to the countrys already-unsustainable $27 trillion national debt. According to FS Stapleton Alliance, the increase in broad money supply and markets awash with liquidity will further weaken the dollar as investors leave the safety the currency provided during the early days of the pandemic.
The dollar provided a safe haven during the huge sell-off in risk assets last March but now that the availability of three highly-acclaimed vaccines, risk appetite has returned and investors are putting all the freshly-printed dollars the Federal Reserve provided to better use in stocks and other assets, said Mr. Eddy Leong, Chief Finance Officer at FS Stapleton Alliance.
FS Stapleton Alliance says it has set its target for the dollar index (DXY) a gauge of the dollars value as measured against a basket of currencies at 88 in 2021.
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