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Dollar loses its dominance. Is it the end of dollar age?

July 10, 2020

July 10, 2020

End of Dollar AgeDmitri Demidenko

Forex leader is going to be different: euro and yuan can replace the

US dollar

New regimes start during the time of great turmoil. The coronavirus pandemic has become such a turmoil for the global economy. It thought that COVID-19 mostly kills elderly patients with other accompanying diseases. The world’s economy has been really old, the expansion stage lasted for a long time, US economic expansion was the longest in history. And there are many accompanying problems. For example, the excessive corporate debt, the excessive dependence on the US dollar, the inability to imagine the oil market without the intervention of OPEC +, and the endless ultra-easy monetary policy. Is it time for a new regime to start?

![LiteForex: Dollar loses its dominance. Is it the end of dollar age?][1]

Everything is alright with solving the problems. But hardly anyone succeeds in not creating the problems. When the Fed, managing the economic recession, surprised the financial markets with a sharp interest rate cut and the huge size of the QE, it was considered insane. Next, the Fed was praised, and then reproached for too gloomy forecasts. After that, the Fed was again praised without any reason, just looking at the US stock indexes rally. The markets long ago realized that the US president can’t lose his wisdom… No one can lose what he doesn’t have. The size of the stimulating measures is not the most important, the most important is to take control over COVID-19. The euro area managed to do it, it turned out to be a good manager…

![LiteForex: Dollar loses its dominance. Is it the end of dollar age?][2]

While Washington was looking for someone to put the blame for the pandemic, the EU countries imposed strict lockdown. The US paid money to the unemployed, while the euro area prohibited to dismiss employees. As a result, US unemployment rose to the highest levels since the end of World War II, but it didn’t much change in the euro-area. The lockdown in the Eurozone was stricter than in the US, and the USA is now facing the second wave, while Europe has avoided it so far. The EU governments are willing to support the euro-area economy, which strengthens the euro.

One of the early signs of the new regime has become a change in the monetary policy views of the central banks. Earlier, it was beneficial for the ECB to hold the euro weak, as it supported the export-led euro- area economy. Now, the euro’s strength is the result of good management in the battle with COVID-19 and economic recession. The same is true for China, by the way. The Chinese yuan has been steadily growing. A strong currency, first of all, is a sign that the country supports domestic consumers more than foreign buyers. It seems to be the right strategy when international trade is facing a downturn.

![LiteForex: Dollar loses its dominance. Is it the end of dollar age?][3]

Being shocked, people often say and do not what they mean or should. The same with the world’s major currencies. The US dollar has slipped down and continues rolling down. Even a difficult epidemiological situation in the USA doesn’t support the dollar’s value as a safe haven. Due to the cheap liquidity provided by the Fed and low government bond yields, the S&P 500 remains steady. Donald Trump believes that his approval ratings grow when the US stock indexes grow. It doesn’t make much sense. People only trust presidents when see them on banknotes. The larger is the banknote value, the more people trust. The age of the dollar and Trump is to end soon. It is time to replace them, isn’t it?

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Price chart of EURUSD in real time mode

![End of Dollar Age][6]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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