"Strengthening of the Dollar Intensifies Due to COVID-19 Concerns"

[Asia Economy Reporter Kim Eunbyeol] Amid ongoing concerns about the novel coronavirus infection (COVID-19), the US dollar is strengthening further.

According to the International Finance Center on the 16th, last week the US dollar showed strength as demand for safe-haven assets poured into the US, where economic conditions remain favorable. The US dollar rose 0.4% last week. On the 14th (local time), the US dollar index closed at 99.16, up 0.09% from the previous day. On the 22nd of last month, when COVID-19 began to spread rapidly, the dollar index was at 97.53, meaning it has risen 1.7% in less than a month.

According to the JP Morgan index, since investors' concerns about COVID-19 began to affect financial markets, the US dollar has risen 1.65% against a basket of other major currencies. The JP Morgan index also shows that currencies of emerging market countries, whose futures are most closely linked to the Chinese economy, fell 2.36% during the same period.

The dollar's strength weakens US export competitiveness, ultimately acting as a headwind to US economic growth. Accordingly, there is analysis that the US Federal Reserve (Fed) may face pressure to ease monetary policy, contrary to earlier expectations. According to CME Group, market expectations are spreading that the Fed could cut interest rates by 0.25 percentage points as early as July.

The dollar's strength is advantageous to South Korea's exports in the short term. However, it cannot be judged solely by exchange rates, and since the spread of COVID-19 may reduce global trade volume itself, it is not necessarily favorable for export companies.

The International Finance Center stated that next week, close attention should be paid to how major countries respond to the spread of COVID-19. How each country assesses the economic impact of COVID-19 will be an important hint, according to analysis.

On the 20th, the People's Bank of China will announce its monetary policy, and the minutes of the US Fed's Federal Open Market Committee (FOMC) and the European Central Bank (ECB) will also be released. On the 17th, Japan's Gross Domestic Product (GDP) will be announced.