The Strategist

Deutsche Bank analyst: Investors may abandon the dollar in the second COVID-19 pandemic wave

06/23/2020 - 07:27

An expert at Deutsche Bank warned that investors would abandon the dollar if the second wave of the COVID-19 coronavirus pandemic begins. According to him, the US exit strategy from restrictions looks worse than that of other countries.

401(K) 2012 via flickr
401(K) 2012 via flickr
Investor demand for the US dollar as a reserve currency could drop significantly if the second wave of coronavirus starts, Deutsche Bank macro strategy chief on Asian markets Sameer Goel said in an interview with CNBC.

According to the analyst, foreign exchange markets are currently facing "multiple counter flows." The “main question” for investors is whether or not to buy a dollar with a premium for its apparent safety amid concerns over a possible second wave of the novel coronavirus in the United States. A new outbreak of COVID-19 could make the dollar seriously weaken against most currencies in developed countries, including China, Goel warned.

Goel noted that since March, when the coronavirus began to spread actively around the world, investors preferred the American dollar to currencies from the countries of the “Group of Ten” (the UK, France, Germany, Italy, Japan, Belgium, the Netherlands, Sweden, Canada, USA and Switzerland). According to him, investors usually “flock to the US dollar” in times of uncertainty, partly due to its relatively good position as a global reserve currency. Now, however, the situation is changing, he noted: “It seems that the urgent demand for the dollar is decreasing.”

The expert emphasized that the current US exit strategy from restrictions looks worse than that of other countries. “Our mobility tracker suggests that most of Europe, for example, is opening faster than the US,” he said.