COVID-19

Is a deeper dollar slump ahead as vaccine nears?

Sabri Ben-Achour Nov 23, 2020
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Matt Cardy/Getty Images
COVID-19

Is a deeper dollar slump ahead as vaccine nears?

Sabri Ben-Achour Nov 23, 2020
Heard on:
Matt Cardy/Getty Images
HTML EMBED:
COPY

The U.S. dollar is at a 2½-year low. In other words, it’s slipping in the global popularity contest among investors. This slump is pandemic-related.

Investors use the U.S. dollar as a safety blanket when there’s a crisis and they’re scared. They pile their money in from around the world, and the value of the dollar goes up. This happened early in the pandemic. But with three solid vaccines on the horizon, investors aren’t so scared anymore.

“These safe havens are less attractive, and people are willing to take on more risk,” said Scott Wren, senior global market strategist with the Wells Fargo Investment Institute. Investors are sniffing around other countries and other currencies. That’s the charitable explanation. The other thing going on here is that the U.S. dollar is less attractive because the U.S. itself is less attractive.

“The overarching reason is that the U.S. simply hasn’t done a good job controlling the virus,” said Win Thin, global head of currency strategy at Brown Brothers Harriman.

“If you look at China, Korea, Taiwan [or] Singapore, they’ve all done an incredible job at controlling the virus,” Thin said. “You could throw New Zealand in there as well.”

Thin said investors have been drawn to those countries — and those currencies — because their economies are up and running and they’re expected to outperform. Meanwhile, the U.S. keeps breaking infection records and is headed for more shutdowns. In normal times, one might be concerned that a falling dollar would increase inflation by making imports more expensive. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that’s not really an issue right now.

“There’s so little danger of imported inflation for goods prices right now because goods are in global oversupply,” he said.

And a falling dollar is good for U.S. exporters, even if it is in part a macroeconomic indictment of the country’s management of the coronavirus.

COVID-19 Economy FAQs

Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?

This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.

Could waiving patents increase the global supply of COVID-19 vaccines?

India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

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