US, Failed COVID-19 Response... A Warning from the 'Dollar'

Dollar Value Drops 10% Compared to March This Year
Dollar Weakens as COVID-19 Cases Increase

[Asia Economy Reporter Naju-seok] The sharp decline in the value of the dollar has been pointed out as a result of the U.S. government's failure to handle the novel coronavirus infection (COVID-19).

On the 3rd, Bloomberg reported that the approximately 10% drop in the dollar's value compared to its peak in March this year is a warning that the U.S. government must urgently control the spread of COVID-19.

In the early stages of COVID-19, the dollar was recognized as a safe-haven asset. Especially as the virus spread rapidly in Europe, while the U.S. remained relatively stable, investment in U.S. Treasury bonds surged. However, the situation changed as the spread of COVID-19 accelerated in the U.S. As the U.S. became the country with the largest number of confirmed COVID-19 cases worldwide, concerns about the impact on the U.S. economy grew, raising doubts about the value of the dollar.

With the spread of COVID-19 in states such as California, Texas, and Florida, which is even called a second wave within the U.S., the possibility of an early economic rebound in the U.S. has become difficult to expect.

The economic situation in the U.S. becomes clearer when compared to Europe. Except for eight years since 1992, the European economy has generally lagged behind U.S. growth. However, this trend is now being confirmed again. Recently, signs of economic recovery have been observed in Europe, whereas this is not the case in the U.S. The difference between the two ultimately depends on whether the spread of COVID-19 has been curbed.

Jerome Powell, Chair of the U.S. Federal Reserve (Fed), stated after the Federal Open Market Committee (FOMC) meeting, "The future economy will depend on the trajectory of COVID-19." Although neither the Fed nor the U.S. government explicitly mentioned it, this implies that future U.S. monetary and fiscal policies will not be free from the direct impact of the COVID-19 spread.

Steven Zeng, co-founder of G Fund Horizon SLJ Capital, said, "The good news that investors desperately want is controlling the virus," adding, "The value of the dollar reflects not so much economic fundamentals but relatively the control situation within the U.S."