Jakarta, CNBC Indonesia – United States dollar (US) the king of world currencies fell. The US dollar index, which measures the strength of Uncle Sam’s currency, continued to decline until it touched its lowest level in more than 2 years.
The fall of the US dollar has actually been predicted by many analysts several months ago. There are several main factors that are predicted to make the greenback collapse, and they do happen. The monetary and fiscal stimulus in the US, the victory of Joseph ‘Joe’ Binden in the US presidential election, and the coronavirus vaccine.
Launching Refinitiv data, the US dollar index fell 0.22% yesterday, after slumping 0.61% on Tuesday. While today, the US dollar index fell 0.19% to 90.946 at 15:48 WIB, and is at its lowest level since April 27 2018.
Joe Biden’s victory in the US presidential election against the incumbent Donald Trump has accelerated the decline of the US dollar. During November the dollar index was down 2.31%.
Looking back, the US dollar has started a downward trend since mid-March after reaching its highest level since January 2017 at 102.99.
The US government and central bank (Federal Reserve / The Fed), which responded to the coronavirus disease (Covid-19) pandemic by pouring out fiscal and monetary stimulus, knocked out the US dollar.
The fiscal stimulus that was disbursed by President Trump was worth US $ 2 trillion, very jumbo, on its way the value of the stimulus increased to nearly US $ 3 trillion.
Meanwhile, the Fed cut interest rates to an infinite amount of quantitative easing (QE), meaning that it will do whatever it takes to restore the economy.
A new round of stimulus in the US is now emerging again which puts the US dollar under pressure.
In a written statement, Chairman of the House of Representatives (one of the two chambers that make up the congress) Nancy Pelosi said the Minister of Finance Steven Mnuchin would review the proposals submitted by the Democrat Party. One of them is that the anti-corona virus vaccine must be free and can be enjoyed by anyone.
In addition, Pelosi and Senate Minority Party Leader Chuck Schumer supported a jumbo fiscal stimulus package worth US $ 908 billion. This is ready to be passed by the two majority political parties in the US to support small business and unemployment in the US
The stimulus decision must be fast, because the deadline for fiscal 2021 budget approval is December 11, 2020.
In addition, the Fed will announce monetary policy on Thursday, December 17 in the morning WIB. There is a chance the Fed will increase its monetary stimulus by increasing the value of QE.
The fiscal and monetary stimulus makes the money supply, in theory, an increase in the money supply causes the exchange rate to weaken. And the fact is that the US dollar continues to decline.
In addition, fiscal and monetary stimuli have improved sentiment of market players, and are again hunting for risky assets, the US dollar which holds safe asset status (safe haven) becomes unattractive.
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