Crash in USD: the Dollar Smile Turned into a Painful “Grin”

WikiFX News (8 Aug)- DXY has slid as more as 10% since this March and the losses have deepened in recent weeks amid the second wave of the pandemic. The theoretical dollar smile has flattened, sending a painful “grin” to investors instead.

Capital Ltd., the U.S. currency tends to increase in value against other currencies when the U.S. economy is weak. It goes up at either end of the spectrum, just like the smile on your face. Actually, after hitting the high in March, the greenback continuously slumped to a two-year low in July. In this regard, it should have poised for a rally in theory.

But the assumption he made turned out to be wrong. The dollar has languished as rising infections and mortality from the pandemic sapped appetite for the currency as a haven. The dollar smile has flattened and turned into a painful “grin”.

According to Boris Schlossberg, managing director of FX strategy at BK Asset Management, the dollar has suffered from a very serious decline during the whole month of July. Interest rates are going down, and that makes the dollar much less attractive, but the market is starting to become aware of the political risk of the dollar. He thus made a bold prediction that the dollar was heading for a crash and the world gold standard system would rise again.

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