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US Dollar Weakens, Still Poised for Best Week Since Financial Crisis

March 20, 2020 at 16:43 by Andrew Moran

Benjamin Franklin looks from a 100 dollar notesThe US dollar is weakening against a couple of major currency rivals at the end of the trading week, but the greenback is still on track for its best week since the financial crisis more than a decade ago. With tremendous economic and health uncertainty throughout global markets because of the coronavirus pandemic, investors are pouring into the safe-haven asset and propping up the dollar.

The consensus on Wall Street is that investors everywhere just want to hold cash. They are liquidating their assets and holding the dollar since they do not know where the bottom is and how much more chaos is in store for the leading stock indexes around the world. This has been evident in March with traders selling off everything from stocks to bonds to metal commodities.

Even with the Federal Reserve embarking upon massive monetary expansion and the federal government unleashing a $1.2 trillion stimulus package, the dollar is not showing any signs of slowing down.

On Friday, the Eccles Building announced that it would extend its quantitative easing program to include municipal bonds. So far, the US central bank has limited its asset purchasing efforts to Treasurys and mortgage-backed securities to keep liquidity throwing through the financial system. It noted in a statement that it wants to help keep state and municipal money markets “functioning” during this crisis.

The iShares National Muni Bond ETF (MUB) jumped as high as 2% on the news.

A day earlier, the Fed confirmed that it had established six-month dollar swap lines with nine additional central banks to help lessen the liquidity blow in international dollar funding markets. The new facilities will extend $60 billion in swap lines with Australia, Brazil, Mexico, Singapore, South Korea, and Sweden. The lines will include another $30 billion for Denmark, New Zealand, and Norway.

But the greenback could be delivered a massive blow next week when a historic jobless claims report is released. Some experts are warning that there could be as many as 2.2 million initial jobless claims, which would be dramatically up from the recent reading of 281,000.

Elsewhere on the data front, existing home sales surged 6.5% in February, up from the 2.2% contraction in January.

The US Dollar Index, which measures the greenback against a basket of currencies, tumbled 0.4% to 102.35, from an opening of 102.94. The index is still poised for a huge weekly surge of 3.7%, the best weekly performance since the economic collapse 12 years ago. Year-to-date, it is up more than 6%.

The USD/CAD currency pair fell 1.12% to 1.4352, from an opening of 1.4512, at 16:36 GMT on Friday. The EUR/USD dipped 0.11% to 1.0681, from an opening of 1.0691.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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