The long-term value of the US dollar is expected to continue to weaken regardless of whether Donald Trump or Joe Biden will win the US presidential election held today, according to investors and analysts as a result of a Reuters poll.
Although the currency is currently strengthening against major currencies, the fact is that the dollar index is still low about 9% from the highest level it reached in March. In fact, this will be the worst year since 2017, weakened by expectations that interest rates will remain at their lows for the next few years.
Many market players believe that Joe Biden’s victory will push the USD lower against expectations that he will open the door to policies that investors see as ‘dollar-negative’, including massive fiscal stimulus.
Meanwhile, if Trump wins, the outlook for the value of the USD is less clear. This is because, although Trump's approach to war with China will increase the attractiveness of the USD as a safe-haven asset, this increase is likely to be affected by factors such as negative US treasury revenue.
The fall in 10-year US treasury yields below zero following the Covid-19 pandemic crisis this year has reduced the attractiveness of the US dollar.
According to a survey conducted by Reuters in September, analysts expect treasury yields to increase to 0.93% in 12 months. However, there is no scenario that shows that the current USD downtrend will stop, given that real US yields remain inclined towards the negative.
In addition, low interest rates are also one of the factors to the weakness of the USD. Previously, the US interest rate was relatively high compared to other developed countries and supported the USD currency by making it more attractive to investors.
