The US Dollar (USD) currency has experienced great uncertain shifts in value for the better part of 2021, which has made it very volatile. This poses a great challenge, especially if you are looking to invest in stock markets in the long run and what to find out how safe it would be to invest in the US dollar after 2021. In addition to the validity, these are very uncertain times. External forces such as the coronavirus pandemic and the falling stock market in the US contributed to a fall of greater than 3% in the USD value from the peak it had achieved in February. Therefore, you might want to consider some of the facts that might influence the USD’s value shortly.
The Coronavirus Pandemic
Like any other natural disaster, the coronavirus pandemic has great potential to affect the USD exchange rate. Already, there have been significant fluctuations in the exchange rate that can be attributed to the outbreak. Despite this fact, most banks anticipate that the USD will finish the year stronger than other currencies. The USD is likely to get out of the pandemic with a higher value in the stock market. Luckily, you can access currency news, historical data, conversion, and exchange rates from ExchangeRates.org.uk using mid-market rates that are updated every minute. Besides, you can always access a wide range of currency exchange rates from trustworthy sources that provide historical exchange rates and currency rates in a wide range of options. Despite the global pandemic, you shouldn’t worry about currency fluctuations.
Imports and Exports
Imports and exports are a crucial aspect of determining the value of a country’s currency. High amounts of imports often indicate that the country’s economy is doing well, which leads to an appreciation of the currency. In such a case, the imports are higher than the exports. Overall, the USA has been the leading world importer recording the world’s highest amounts of imports. On the other hand, China has been the largest exporter and consequently, the existence of the trade wars between the two economic giants.
With the current disruption of supply chains across multiple economic fields, it is evident that the value of imports and exports will both reduce. This could mean a reduction of the USD value, but only subject to the global market trends. As the pandemic effects cut through multiple borders affecting business in the whole world, most other currencies would be affected, making the relative comparison of the USD higher.
Politics plays an equally fundamental role in determining the exchange rate of any given currency. The current political situation in the United States presents a considerable challenge to the United States’ currency value. Many investors complain about the inability of the current US president, Donald Trump, to deliver on his pre-election promises. Besides, there is continuous domestic and international political turmoil arising from conflicting political and economic interests. Investors considering such events might be pushed into selling the USD with fears that it might lose value soon. Rapid swelling of the currency would eventually lead to an actual fall in the value.
The Nature of the US Economy
The US economy has been known to recover quickly from economic surges, which is attributed to the great potential that the economy has. This potential could, however, be tested in the wake of the pandemic. The state of the economy is a direct determinant of the strength of the USD. Early as March this year, the New York Times published articles concerning some of the government incentives that were to be put in place to facilitate the economic recovery from the downward trend brought by the coronavirus pandemic. Consultation on the best incentives to be used, including a $700 billion plan to waive the payroll taxes, were some of the options in consideration.
With such a measure in place and considering the economy’s deep experience, it is reasonable to expect that the US economy would be on the recovery trend in 2021. However, experts believe that the economy might take up to 3 years to fully recover to its original state.
Performance of Other Currencies
The value of the USD is also dependent on the performance of other economies, which dictate the value of the pair currencies. Most of these other currencies that affect the performance of the USD include the major currencies such as Great Britain Pound (GBP), the Euro (EUR), the Japanese Yen (JPY), the New Zealand dollar (NZD) and the Australian Dollar. An increase in the value of the pair currency would lead to a consequent decrease in the USD’s value.
The mechanisms involved in determining the value of the USD after 2021 are quite dynamic. Considering the factors of the current global coronavirus pandemic, the political situation in the United States, the performance of other economies all contribute to these factors. Most of the USD stability after 2021 is derived from the US economy’s ability to stabilize quickly.