Experts who spoke to “Sky News Arabia” warned of the negative and possibly dangerous repercussions of the current crisis on the value of the dollar, especially as the US government must come up with an urgent mechanism to pay its obligations before Monday, June 5.
US economic analyst Deacon Hyatt says the decline in the dollar or its negative impact could be one of the potential effects of the current crisis in the United States, warning that the government is running out of time to secure its commitments before the set date of the June 5. .
According to Hayat, the damage resulting from the crisis is linked to the US economy as well as the expected repercussions on the movement of the global economy, which is largely linked to the United States.
The American analyst does not expect a decline in the value of the dollar, but potential negative effects linked to the decline in its strength against certain currencies which represent the most powerful competitor within the basket of the six currencies most powerful in the world.
All expectations remain at this time as to the government’s ability to meet the deadline set by the US Treasury to avoid a historic crisis, if the United States is unable to pay its debts.
worst case scenario
The two economists, Kiran Kaushik and Sami Al-Shaar, in a joint analysis, expect a decline and weakness in the value of the US dollar in the coming period, due to several factors, including the US debt crisis, as well as political changes in the global system, and among their most important expectations for the dollar in the year 2023 are:
Belief that recent dollar strength may be short-lived as US growth slows and hopes of a rate cut in 2023 fade. They also expect the US dollar to weaken against the euro, Japanese yen and Swiss franc in the second half of the year and maintain current dollar weighting in portfolios.
According to the two experts, the dollar has maintained its strength in 2023 so far, even amid the current turmoil in regional banking in America, regional banking in America and the political crisis over the US debt ceiling. , but indicators point to overall weakness.
Are safe havens saving the value of the dollar?
For his part, Tony Sycamore, analyst at IG Markets, told Sky News Arabia: “The dollar has had a good and strong rise, and there are good reasons for that”, referring in particular to the demand for safe havens. in the middle of the confrontation. related to the debt ceiling, as well as growing signs of a slowdown in China and Europe.
After tough negotiations, the Senate and House of Representatives passed a bill allowing the government’s debt ceiling to be raised to $31.4 trillion to avoid what would have been the first default by June 5. .
Under the legislation, the federal borrowing limit should be suspended until January 1, 2025.
U.S. Treasury Secretary Janet Yellen welcomed the passage of the legislation, saying, “Passing the debt ceiling bill protects the full credibility and credit of the United States and maintains our fiscal leadership.” , which is essential to the growth and stability of our economy. “Debt to the United States as bargaining chip.
The law imposes a limit on certain expenses, with the exception of military expenses to keep them stable in 2024, and a 1% increase in 2025.
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