Growing USD Supply Will Weaken the Currency

In the past month, USD was in short supply at one point due to the global outbreak and the consequent aggregation of capital. Societe Generale Group commented that currently the dollar is much sought after and increasing risk on the market only drives more investors into holding USD.

But after the Feds massive fiscal stimulus recently, the market began to worry about the negative implications on USD over the long term. Even if the global outbreak alleviates before the end of this year, US may face expanding fiscal deficits, more quantitative easing and other measures to boost dollar supply, creating a context for weakening of the dollar.

US stocks rallied over 20% lately as market sentiments slowly recover, but former Federal Chair Ben Bernanke said he believe the economy won‘t see a V-shaped recovery. The Fed’s latest meeting minutes suggest that economic outlook has quickly deteriorated in the past weeks.