Now that the situation between China and the United States is becoming more and more tense, coupled with the new crown epidemic in the United States once again, the US dollar has faded its risk-averse appeal. The US dollar index fell below the 94 mark on Monday (July 27), reaching its lowest level in nearly two years.
Although the Sino-U.S. mutual relations and consulates marked an escalation of tensions between the two countries, the lack of support for the U.S. dollar is a change for the U.S. dollar. During the epidemic crisis, the U.S. dollar has been closely tracking the fluctuations in global confidence.
Currently, the U.S. dollar index has fallen 8% from its high level during the year, which is close to its lowest level since 2018. The US dollar net short position in the futures market is approaching a two-year high.
On this occasion, billionaire investor Ray Dalio said that the conflict between China and the United States could expand into a “capital war,” and he hinted that this would harm the dollar.
According to a Bloomberg report, Dario, the founder of Bridgewater Associates, the largest hedge fund, put forward a vision for the next conflict between the two countries based on what he said was a measure of possibility.
He also warned that loose fiscal policy and ideological differences are pushing the United States into recession.
Dario said on Fox TV’s Sunday Morning Futures program: “China and the US already have trade wars, technological wars, geopolitical wars, and there may be capital wars.”
He said: “If the law says not to invest in China, or even refuse to redeem bonds, these are measures that the US government may take. They will have a big impact, such as affecting the value of the U.S. dollar.”
He said that the United States has become “our own worst enemy” and is already threatening the stability of the dollar.
The downward trend of the US dollar has intensified in recent weeks. Investors no longer favor the US dollar due to the U.S. epidemic’s counterattack, improved overseas economic prospects, and the increasingly bearish long-term outlook on the US dollar index technical chart.
Dario said: “My biggest worry is whether our currency is stable. You can’t continue to generate deficits, sell debt or print money, but you have to increase productivity and maintain it for a period of time.”
He added: “If we don’t work together to do some reasonable things, such as increasing productivity, earning more income than spending, establishing the stability of our currency, and building a balance sheet, then it will decline. For these reasons, the United States Is fading.”
Paul Ciana, chief global FICC technical strategist at Bank of America, said that the dollar fell earlier this month, forming a “death cross” technical pattern, that is, the 50-day moving average crosses the 200-day moving average downward.
Goldman Sachs analysts said that although they expect investors to be cautious about euro assets in the short term, due to the low bond yields in the United States and the slow growth of corporate revenue, as well as the EU’s current fiscal integration behavior, investment The author believes more firmly that over time, the euro will continue to rise and the dollar will continue to fall.
George Boubouras, head of research at K2AssetManagement, said, “The strength of the U.S. dollar is now truly over and I am shorting the U.S. dollar against the Australian dollar. As the United States struggles to deal with the epidemic, the Fed will introduce more stimulus measures, and the uncertainty of the general election will also come. Are likely to have a negative impact on the dollar.”