Expert tells how the political situation in the U.S. will affect the dollar

Expert tells how the political situation in the U.S. will affect the dollar

On the eve of the impeachment of U.S. President Donald Trump, the dollar is rising against world currencies. Its growth was recorded on Monday afternoon, while the euro declined against the dollar to its lowest since December 25 amid rising U.S. government bond yields and lower demand for risky assets.

The question of impeachment could be considered by the U.S. House of Representatives on Wednesday. It was raised after supporters of the incumbent White House leader stormed the U.S. Congress building in an attempt to disrupt the confirmation of Democrat Joe Biden’s victory in the presidential election. As EADaily reported, five people were killed in the riots, more than 50 were detained, and 25 criminal cases of domestic terrorism were opened. It should be noted that this did not have much effect on the dollar exchange rate.

Our correspondent talked to Ayaz Aliev, associate professor at the Financial Management Department of the Russian University of Economics and Doctor of Economics, about the future prospects of the American currency and the financial market.

– After the events at the Capitol in the U.S., some U.S. indexes even showed growth,” says the economist. – Labor market statistics, as well as optimistic market sentiments, contributed to this as Biden’s victory promises new infusions to the markets.

– What is the nature of these expected changes?

– The main criterion of the market is changing. Under Trump, there were profits, in the form of tax cuts and less money printing. Under Biden, the markets expect more government spending, more money due to high spending, and plenty of liquidity in the market. These factors are the best prospect for rapid economic growth.

– What are the options for future developments due to this or that development in the U.S.?

– I don’t think anything extraordinary will happen and everything will go the other way around. In this regard, it is possible that in the medium term, if the growth of the U.S. economy accelerates, capital flows will turn back to the U.S. This will contribute to the strengthening of the dollar. After all, the dollar’s exchange rate against a basket of the world’s major currencies is near a three-year low and strong economic growth may lead to a strengthening of the U.S. currency.

– Is another scenario possible?

– Yes, there are expectations that the dollar will continue to be weak in 2021. The argument in favor of such assumptions is the growth of the budget deficit and the debt. The Fed is going to keep interest rates near zero for a long time, which does not make the dollar attractive.

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