The fact that the U.S Dollar is still a prominent voice in terms of global currencies has left lots of people scratching their heads, most especially in the wake of economic meltdown due to the coronavirus pandemic. So, the question on people’s minds is why and how is the dollar growing stronger despite the billions in money printing?
Before the emergence of COVID-19, 2020 was already earmarked to be to a gladiator match for money supremacy. Coming off the back of 2019, that featured the growing acceptance and utilization of Bitcoin, the proposed launch of Facebook’s Libra, the emergence of China’s digital currency, among other things.
The arrival of coronavirus meant the battle for the future of money would take a different turn.
Towards the end of January this year, there was growing concern in regards to the spread of coronavirus in Wuhan, China. China issued a lockdown for Wuhan. In February, the lockdown extended to over 150 million people in the country. The virus made its way into various parts of Europe, North America, Africa, and the rest of the world.
The spread of the virus led to a massive blow to most economies in the world in February. Despite this, the U.S stock markets continued to scale new heights. The Dow Jones Industrial Average reached an all-time high in the second week of February, and the following week, the S&P 500 reached an all-time high.
On February, 24th things started to take a downturn. Caitlin Long, a Wall Street veteran, said, “the virus put a strain on the banks. Nobody can solve a pandemic via the liquidity of assets. It won’t work.”
The last week of February was messy. The end of the week saw a 10% drop from a week earlier. “Many people didn’t see this coming. It was a historic drop that has never happened since World War 2,” said Scott Melker, a crypto trader.
By the start of March, fear had already made its way into markets, and people were poised for evasive actions.
Cue in the closure of businesses due to the spread of the virus leading to loss of jobs, a spike in unemployment, and so on. In response to these perilous times, the U.S government responded with a monetary stimulus never before seen in the world. Under normal circumstances, such a stimulus would lead to inflation, and thus the weakening of the dollar. But interestingly, the dollar has grown tremendously in comparison to other currencies. It would seem the dollar turned its instrument of damnation into a tool for salvation.