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Forex: The dollar rebounds after scoring a 2-year low

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The dollar rebounds in a 2-year low after a poor performance in recent weeks in the Forex market. Will it mean that the US currency is on the way to a speedy recovery?

July was the most difficult month for the dollar in its performance in the Forex market. Reaching a minimum not seen in more than 2 years for the currency, investors stopped focusing on the American currency.

This negative performance looked like it was going to continue, but the dollar rebounded on Tuesday.

Did the dollar regain strength?

The dollar rebounds after a 2-year low and appears to have rebounded on Tuesday after a two-year underperformance. This lift was due to the fact that the selling pressure in the stock market vanished before a meeting of the Federal Reserve.

In addition, there was a significant advance in political discussions on the upcoming US tax bailout package, as they finally seem to be coming to a conclusion.

And although investors saw this performance with surprise, the truth is that analysts predict that the dollar continues to stagnate in its poor performance for the month.

Well, it takes much more than a sudden bounce to regain its past performance.

Uncertainty grows due to Federal Reserve meeting

Most analysts say the reasons for the big dollar slide, especially the drop in real yields, remain intact. That the currency will not be able to recover from said fall yet.

However, the rhythm of the fall of the American currency stopped his frantic walk in a justified pause. Well, the expected federal reserve meeting to discuss economic issues and the US spending package have allowed a pause for the US currency.

“Perhaps this is a case of the market being ahead of itself,” said Moh Siong Sim, currency analyst at the Bank of Singapore.

Also, Friday’s deadline for the US Congress to extend unemployment benefits creates even more uncertainty, as both events are unpredictable enough to inject some nerves into betting against the dollar.

Finally, analysts do not anticipate any policy change at the Federal Reserve meeting scheduled for Wednesday.

A change could be the average inflation target, which would see the Federal Reserve aim to push inflation above its 2% target.

Performance of the dollar on Tuesday

Against a basket of currencies, the dollar rose from a two-year low from 93,492 to 93,918. Still, it is down 3.6% in July and will need a stronger rebound to avoid posting its worst month in nearly a decade.

The dollar rises after a minimum of 2 years in the Forex market.
The dollar rebounds after a minimum of 2 years in the Forex market. Source: Investing

In the case of the virus, infection rates in the US appear to stabilize, with a slight drop, although it is still early to draw conclusions.

But the economic impact of restrictions to curb its spread and job losses are just beginning to show their effects on the American economy.



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