The U.S. dollar has fallen sharply from the high it reached during the Covid shutdowns earlier this year, and the extent of its decline in the coming year depends on the course of the virus and the global economic rebound, according to a top currency strategist and economist.
"The ultimate destination for the dollar is a weaker dollar, but when it really gets going it's going to really depend on how bad the lockdowns are over the next few months, and how they roll out the vaccine globally," said Jens Nordvig, CEO of Exante Data. A strong global economy means other assets may become more attractive than the dollar, but if lockdowns slow economic activity, the dollar could hold up better than expected.
The U.S. Dollar index, which represents the dollar against a basket of currencies, is down more than 12% from its March 20 high of 102.992. It's down 7% for 2020.
Against the euro, the dollar has fallen nearly 15% since March. The dollar had surged in a flight-to-safety trade when governments around the world locked down their economies because of the surge in coronavirus cases in the first quarter.