Best Week for Dollar Since 2008 - Will Rally Last? | DZHI - DZH International 

Best Week for Dollar Since 2008 - Will Rally Last?

  • Kathy Lien
  • 21 March 2020

Best Week for Dollar Since 2008 - Will Rally Last?


Daily FX Market Roundup March 20, 2020


We have not seen such a strong week for the US dollar since the 2008 Global Financial Crisis. This fact alone explains why the greenback has been performing so well.  There’s no doubt that the US economy will be hit hard by COVID-19 but as a percentage of GDP, the rest of the world could suffer more. It will also be very difficult for smaller economies to recover if the US is still in lockdown. California, Texas, New York and Pennsylvania have closed all non-essential businesses and collectively, they contribute 35% of US GDP. The Dollar Index rose more than +3.3% this week as the euro tumbled -3.5%, the Japanese Yen fell -2.25%, sterling dropped -4% and the Australian dollar plunged nearly -5%.


Over the past week, countries around the world have announced major fiscal and monetary stimulus. Their efforts helped markets stabilize towards the end of the week but don’t expect these rallies to last. Jobless claims could spike to the millions next week, reflecting the damage COVID-19 has done to the economy. Mass layoffs and furloughs will have a damaging impact on retail sales and broader economic activity. With companies expected to report major losses in the first quarter, it will be extremely difficult for the relief rally in stocks to last. 


For our readers, the main question is whether the US dollar will retain its safe haven bid and extend higher in the coming week and our answer is yes its possible as long as there’s no intervention. From a monetary policy perspective, the Federal Reserve is running out of options so we don’t see any big bazooka announcements next week that could threaten the dollar’s rally. They’ve already taken interest rates to zero, restarted QE and provided support for money market funds. President Trump’s fiscal stimulus package could move through Congress quickly and the progress could lift the dollar. There’s also very little market moving data on the calendar that could hurt the greenback. The main numbers to focus on will be durable goods, revisions to GDP and revisions to the University of Michigan Consumer Sentiment index.


The main risk for the dollar is G7 currency intervention. With the rise in the greenback driving many currencies to multi-year lows, central banks from Brazil to Norway have rushed to prevent further losses. There’s a very good chance that coordinated action on a global scale will be next. If they come into the market, it will be to sell dollars, not buy them. Individual central bank interventions rarely have a lasting impact on currencies but shock and awe moves could temper the rise and calm equity markets.




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About the Author
Kathy Lien
Kathy Lien is Managing Director and Founding Partner of BKForex. Having graduated New York University’s Stern School of Business at the age of 18, Ms. Kathy Lien has more than 13 years of experience in the financial markets with a specific focus on currencies

Ms. Kathy Lien is Managing Director of FX Strategy for BK Asset Management and Co-Founder of Her career started at JPMorgan Chase where she worked on the interbank FX trading desk making markets in foreign exchange and later in the cross markets proprietary trading group where she traded FX spot, options, interest rate derivatives, bonds, equities, and futures.

In 2003, Kathy joined FXCM and started, a leading online foreign exchange research portal. As Chief Strategist, she managed a team of analysts dedicated to providing research and commentary on the foreign exchange market.

In 2008, Kathy joined Global Futures & Forex Ltd as Director of Currency Research where she provided research and analysis to clients and managed a global foreign exchange analysis team. As an expert on G20 currencies, Kathy is often quoted in the Wall Street Journal, Reuters, Bloomberg, Marketwatch, Associated Press, AAP, UK Telegraph, Sydney Morning Herald and other leading news publications.

She also appears regularly on CNBC’s US, Asia and Europe and on Sky Business. Kathy is an internationally published author of the bestselling book Day Trading and Swing Trading the Currency Market as well as The Little Book of Currency Trading and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game all published through Wiley. Kathy’s extensive experience in developing trading strategies using cross markets analysis and her edge in predicting economic surprises serve key components of BK’s analytic techniques.