A Dollar Cycle Like No Other

Accommodative monetary policy and an uneven recovery have eroded the value of the U.S. dollar, but unique global conditions could limit its downside.

Following an appreciation cycle that has spanned nearly a decade, the dominance of the U.S. dollar looks to have been upended by the COVID-19 pandemic, or so the conventional wisdom goes. We believe the outlook is far more nuanced and region-contingent, as evidenced by the dollar’s divergent performance versus advanced (G-10) and emerging market (EM) currencies in the last few months.

In our view, the dollar faces an uphill battle from here. Early on in the pandemic, the dollar appreciated consistent with its historical role as the ultimate safe-haven currency.1 But we believe an unprecedented degree of fiscal support, the Federal Reserve’s expected commitment to make up for past inflation target undershoots, and the United States’ uneven recovery are likely to impart a depreciation bias to the dollar in all but the most extreme cyclical scenarios.

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The Author

Gene Frieda

Global Strategist

Sachin Gupta

Head of Global Portfolio Management Desk



Past performance is not a guarantee or a reliable indicator of future results.

All investments contain risk and may lose value. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio.

A “safe haven” currency is a currency perceived to be low risk due to the stability of the issuing government and the strength of the underlying economy. All investments contain risk and may lose value

Beta is a measure of price sensitivity to market movements. Market beta is 1.

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