Question

The value of the US dollar has gotten stronger during the covid-19 pandemic. Provide a rationale for this development and a prediction on where the value of the US $ will be by the end of this year.

Answer 1

IMPACT OF COVID - 19 - many countries across the world has been entered in the recession due to adverse impact of covid - 19. even the economy and the exchange of US has been very fluctative.DOW Jones and S&P has shown the lowest point since 2008 crash.

but still the value of Dollar is getting stronger day by day.

the reason may be stated below-

1. CEASING EXPANSIONARY MONETARY POLICY- when USA adapted to end the expansionary monetary policy then the supply of $ remained constant and as a result of this corresponding to the demand the value of dollar increased.(expansionary monetary policy implies to a situation where central bank of a country say FEDERAL BANK stop publishing the currency )
2. FOREX TRADING AND ITS IMPACT- US dollar plays an important role in the forex trading. when investors and traders use the dollar as margin then the value in the market for dollar gets appreciated.
3. DEPENDING ON FOREIGN DEALINGS- sometimes the value of US dollar depends on the external factors such as recently the OPEC crud oil crisis , foreign exchange rate decisions changes in some other county , when European central bank lowered the value of its currency then the value of US dollar increased automatically.

PREDICTION FOR THE VALUATION OF DOLLAR AT THE END OF THIS YEAR-

to judge the value of dollar during this crisis timing is very difficult because each and every country is tying to invent and find the vaccination of COVID-19. thus if US would be able to make the vaccine soon then automatically the value of dollar would go up.

if the situation remains risky and threats,the investors would seek the safe option rather then investing into the stock market for example US treasure bills and bonds which will eventually enhance the value of dollar in the market.

so there are pretty much chances that at the end of the year dollar might be able to make new highs in the different areas of the world.