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October 23, 2018

Goldman Sachs warned for weakness of the US dollar

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US dollarGoldman Sachs warned that 2018 is likely to be another weak year for the US dollar, despite expectations that the Federal Reserve will make several interest rate hikes in the next twelve months.

“We still believe that the US dollar will be relatively weak against the major currencies, and probably against those in emerging markets”, said Jan Hatzius, a chief economist at Goldman Sachs.

Increasing interest rates from central banks traditionally strengthens the local currency, as investors logically look for higher-yielding assets. However, according to the investment bank’s analysis, comparatively synchronized global growth, as well as mass raising of the key interest rates by central banks around the world, reduces the attractiveness of the US. So in this environment, it is difficult to see a long-term appreciation of the US dollar against major currencies.

The dollar index, which measures USD against a basket of six major currencies, fell about 10% last year after several profitable years, amid the recovery of the US economy. Most market analysts believe that 2018 will not be good for the dollar, not only because of the good performance of other regions of the world, but also because of currency uncertainty, including those surrounding policy of the US President Donald Trump.

Doubts about Trump cause a feeling of concern among international investors about the dollar, and we just have to wait and see what will happen to the United States, according to the analysts.

In 2017, the US dollar fell by about 10% compared to the single European currency, and analysts now believe that “safe haven” in 2018 will remain the euro.

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