NEW YORK, July 28 (Reuters) - An accelerating decline in the U.S. dollar is reverberating around the world, adding fuel to a global momentum rally that has boosted prices for everything from technology stocks to gold.
Other assets are already benefiting from the dollar’s drop. Gold, which like many commodities is priced in the U.S. currency and becomes more affordable to foreign buyers when the dollar falls, stands near its historic high, part of a rally that has driven the S&P/Goldman Sachs Commodity Index .SPGSCI 34% higher since late March, as of Monday.
Developing countries are also likely to cheer a weaker dollar as it makes it cheaper for them to service debt denominated in the U.S. currency.
Emerging market currencies such as the Brazilian real BRL= and South African rand ZAR= have come screaming back in recent weeks, while the MSCI Emerging Markets Index .dMIEF00000PUS, which measures stock performance, is up some 40% from its March lows.
“It has been hard to make an argument for the dollar, short term or long term,” said Juan Perez, currency trader at Tempus Inc. The weaker dollar will likely benefit “emerging market players and holders of real physical material,” he said.
A reversal in risk appetite could push investors to return to the dollar, viewed by many as the ultimate haven.
Evidence of stronger-than-expected U.S. growth could also be a boost for the currency. Investors will be keeping a close eye on the Federal Reserve’s policy statement at the close of its two-day meeting on Wednesday and next week’s U.S. monthly jobs numbers to see whether a resurgent coronavirus pandemic has slowed a nascent economic recovery.
Still, many believe the scales have tilted for the U.S. dollar.