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The dollar is advancing in the longest stretch without gains against a basket of peers in nine months, after investors were optimistic about global growth prospects in April and pushed the exchange rate for four weeks consecutive.
The declines followed a strong performance in March, when the strong economic recovery in the United States sparked expectations that rising inflation could push the Federal Reserve to reduce its support policies, raising bond yields and raising dollar against most other major currencies.
But as a sign that investors think the global economic recovery may not lag behind, the dollar index dropped 2.7% in value in one month to trade at $ 90.98, while currencies with strong links to commodity prices bouncing. The euro rose 3% to $ 1.20 and the Brazilian real became the best-performing currency of the month.
Despite the eurozone plunging into a recession during the first quarter, analysts expect blockchain activity to gradually increase as vaccination programs increase and economies reopen.
“The return of a‘ global ’reflation trade instead of just‘ American ’is the main reason we saw the dollar index lose ground in April,” said Kamakshya Trivedi, strategist at Goldman Sachs.
“In the coming months, we should start disconnecting Covid’s European restrictions and expect solid gains in oil and copper prices, which should keep the dollar behind,” he added.
On Wednesday, Jay Powell, president of the US Central Bank sought to allay fears about a speedy liquidation of the Fed’s asset purchase program, stressing that the obscure political stance was here to stay.
“The Fed has outdone itself. We doubt this will be sustainable, but we must take it for granted, “Bank of America analysts said in a statement.
First-quarter output data showed that the gap between the growth rate of the United States and Europe remains large, with an area of the eurozone rising 0.6% while the US clocked 1.6 percent of its gross domestic product expansion.
Silvia Dall’Angelo, a senior economist at Federated Hermes, said the U.S. economy is likely to perform better in the next two quarters, but the eurozone “should start to recover in the third quarter.” which makes the dollar less attractive once that happens.
However, some analysts are not convinced. Win Thin, head of global currency strategy at Brown Brothers Harriman, said the eurozone is unlikely to coincide with the expansion of the U.S. economy this year, which would cause the Fed to reduce its foreign exchange purchases. assets before Europe.
“One of the factors cited for the recent strength of the euro is the growing expectations that economic divergences will narrow during the second quarter and beyond. However, we just don’t see it,” he said. “The ECB will have to maintain its accelerated pace of asset purchases for much longer than expected.”
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