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Dollar Set for Weekly Win, but Experts Warn Dark Days Will Return

imageForex14 hours ago (Aug 21, 2020 03:44PM ET)

(C) Reuters.

By Yasin Ebrahim – The dollar rose on Friday, and remained set to end the week in the green following stronger-than-expected economic data, but some experts have warned the reprieve for the greenback will likely be short-lived.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.47% to 93.12.

The Commerce Department said existing home sales rose by a record 24.7% in July to a seasonally adjusted annual rate of 5.86 million units., topping forecasts for a 14.7% rise.

A survey of U.S. business activity also helped to ease fears about slack in the economic recovery.

IHS Markit data showed flash Composite Purchasing Managers’ index of 54.7 for August, above forecasts of 51.3.

The greenback has come under pressure in recent months as the spread of coronavirus, which has since eased, spiked across the U.S.

But the damage the second wave of the virus has had on the economy will continue to weigh and force the Federal Reserve to continue with stimulus measures, threatening to send the dollar on a wild swing lower again.

“Although infections with the Covid-19-virus have now stabilized in the US, the relatively rapid outbreak of a second wave of the virus there has clearly tarnished the image of the dollar as a safe haven,” Commerzbank (DE:CBKG) said.

With the Federal Reserve in the midst of tweaking its forward guidance to link monetary policy to the achievement of concrete macroeconomic goals, investors continued to expect that the Fed would stick to its “expansionary monetary policy much longer than was the case after past crises,” the bank added. “This in turn would require a reassessment of the market, especially of the dollar versus the euro. “

Dollar Set for Weekly Win, but Experts Warn Dark Days Will Return

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