For FX Contrarians, Much of Dollar Weakness Has Been Priced In
- Dollar ‘smile’ theory could once again kick in: Jefferies
- Bloomberg greenback index has stabilized near a two-year low
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The dollar’s resilience after falling to a two-year low is surprising forecasters who had predicted that a breakthrough on a coronavirus vaccine and a Democratic victory in the presidential election would give renewed impetus to the currency’s slide.
The Bloomberg Dollar Spot Index has recovered from its weakest levels of Monday, when it sank to the lowest since April 2018 after reports of positive vaccine developments. The view for months has been that a vaccine-fueled rebound in global growth would pave the way for investors to seek better opportunities outside the U.S., undermining the dollar. On top of that, a presidential win by Democrat Joe Biden was seen as one stepping stone toward big fiscal stimulus.